Scott Seldin v. Theodore Seldin

United States Court of Appeals
For the Eighth Circuit
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No. 17-1045
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Scott A. Seldin
lllllllllllllllllllll Plaintiff - Appellant
Derry Seldin; Traci Seldin Moser
lllllllllllllllllllllIntervenor Plaintiffs
v.
Theodore M. Seldin; Stanley C. Silverman; Mark Schlossberg
lllllllllllllllllllll Defendants - Appellees
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No. 17-1047
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Scott A. Seldin
lllllllllllllllllllll Plaintiff - Appellee
Derry Seldin; Traci Seldin Moser
lllllllllllllllllllllIntervenor Plaintiffs - Appellants
v.
Theodore M. Seldin; Stanley C. Silverman; Mark Schlossberg
lllllllllllllllllllll Defendants - Appellees
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Appeals from United States District Court
for the District of Nebraska - Omaha
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Submitted: November 16, 2017
Filed: January 2, 2018
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Before BENTON, SHEPHERD, and KELLY, Circuit Judges.
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SHEPHERD, Circuit Judge.
In 2010, feuding members of the Seldin family entered into a Separation
Agreement to divide jointly owned assets. The Separation Agreement contained an
arbitration clause, requiring the parties to arbitrate any claims involving their jointly
owned property. Rather than arbitrating, Appellant Scott Seldin (“Scott”) filed a
lawsuit for an accounting of a trust that he claims was not included in the Separation
Agreement. The district court dismissed his claim, finding that the federal courts
lacked subject matter jurisdiction to hear the lawsuit. We disagree.
I. Background
Millard Seldin (“Millard”), Scott’s father, created the Millard Seldin
Children’s Master Trust (“MSCM Trust”) in 1992. Theodore Seldin and Stanley
Silverman (together “Appellees”) were designated as two of the trustees for the
MSCM Trust. Scott, along with his siblings, Derry Seldin and Traci Seldin Moser
(together “Intervenors”), were the beneficiaries of the trust. The MSCM Trust
required an annual accounting of the trust assets. Scott alleges that Appellees
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breached their fiduciary duties as trustees and never submitted a trust report to Scott
or Intervenors. The trust was dissolved in 2002.
In February 2010, Scott and Millard entered into the Separation Agreement
with Appellees in order to split the assets in which they had joint interests. The
Separation Agreement included an arbitration clause to settle any disputes arising out
of or relating to the Separation Agreement or the parties’ joint ownership properties
or entities. In October 2011, the parties initiated arbitration proceedings. In February
2012, the parties agreed to mediate, using the arbitrator as the mediator. The
mediation fell apart, and the arbitration resumed. Following the mediation, Scott
began lodging complaints against the arbitrator/mediator, calling for his resignation,
but the arbitrator/mediator refused.
Scott then filed three separate lawsuits against Appellees in the Douglas
County, Nebraska District Court regarding the parties’ joint interests, and each of the
lawsuits was dismissed. Scott filed his first state court lawsuit in April 2012, alleging
claims that were already pending in arbitration. Among his claims was a cause of
action for a full accounting from 1987 to present. The court dismissed Scott’s claim,
finding that he was required to submit to arbitration.
In June 2012, Scott filed a second state court lawsuit, amending the complaint
on October 10, 2012. In March 2013, the state court similarly dismissed the second
lawsuit, ordering the parties to resolve their issues through arbitration. In September
2012, Scott filed a demand with the American Arbitration Association (the “AAA”)
for the disqualification of the arbitrator. The AAA reaffirmed the arbitrator. Scott
filed a Motion to Reconsider or Clarify Ruling, and the AAA denied the motion.
In December 2012, Scott filed a third lawsuit asking the state court to vacate
the AAA ruling or to enjoin arbitration, remove the arbitrator, and reinstate the first
lawsuit. In April 2013, the state court dismissed the third lawsuit. Scott appealed
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each of the lawsuits. Pending the appeals, the arbitrator stepped down, and the
designated replacement arbitrator refused to serve. The parties agreed to select a new
arbitrator through the AAA. Appellees moved to dismiss the appeals as moot, and
on August 28, 2013, the Nebraska Supreme Court granted their motion.
In October 2013, a new arbitrator was appointed, and the arbitration
recommenced. On July 29, 2016, Scott filed a lawsuit in federal court against
Appellees, requesting an accounting of the MSCM Trust. Intervenors attempted to
intervene, but their motion was denied. Appellees filed a motion to dismiss for lack
of subject matter jurisdiction. The district court granted Appellees’ motion to
dismiss, holding that the court did not have jurisdiction because there was a binding
arbitration agreement which gave the arbitrator the authority to first decide the extent
of his jurisdiction. Furthermore, the court stated it did not have jurisdiction because
res judicata and issue preclusion applied. Finally, the court also found that the
Rooker-Feldman doctrine barred the court from hearing Scott’s claim.
On April 27, 2017, after all of the briefing was submitted for this appeal, the
arbitrator entered a Final Award, finding that the Appellees are entitled to recover
from Scott a net amount of $2,977,031, plus post-award simple interest from the date
of the award.1 On May 23, 2017, Appellees filed a Motion to Confirm Arbitration
Award as Judgment in state court.
II. Discussion
The sole issue decided in this appeal is whether the district court erred in
granting Appellees’ motion to dismiss for lack of subject matter jurisdiction. “We
1
We grant Appellees’ Motion for Judicial Notice, requesting that this Court
recognize that the arbitrator entered his Final Award and that Appellees have moved
for the award to be confirmed as judgment.
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review de novo the grant of a motion to dismiss for lack of subject matter jurisdiction
under Rule 12(b)(1).” City of Benkelman v. Baseline Eng’g Corp., 867 F.3d 875,
879-80 (8th Cir. 2017) (quoting Great Rivers Habitat Alliance v. FEMA, 615 F.3d
985, 988 (8th Cir. 2010)).
The district court granted Appellees’ 12(b)(1) motion, finding that the court
lacked subject matter jurisdiction to hear Scott’s claim because the parties had entered
into an arbitration agreement. This case is controlled by our decision in City of
Benkelman v. Baseline Engineering Corp., where we held that a Rule 12(b)(1) motion
to dismiss for lack of subject matter jurisdiction is not the appropriate mechanism to
use to attempt to compel arbitration. Benkelman, 867 F.3d at 880-81. An arbitration
agreement alone, without other statutory or binding jurisdictional limitations, does
not divest the federal courts of subject matter jurisdiction. Id. (holding that “an
arbitration agreement has no relevance to the question of whether a given case
satisfies constitutional or statutory definitions of jurisdiction”). Rather, Rule 12(b)(6)
or Rule 56 motions are the appropriate means for parties seeking to compel
arbitration. Id. at 881.
Here, the parties entered an arbitration agreement, but the existence of that
agreement alone does not deprive the federal courts of jurisdiction. Because a valid
arbitration clause alone does not strip the federal courts of subject matter jurisdiction,
we find that the district court erred in dismissing Scott’s claim on that basis. See id.
The appropriate procedure would have been for the district court to stay or dismiss
the case based on a Rule 12(b)(6) or Rule 56 motion pending arbitration. See id.
The district court alternatively stated that it lacked subject matter jurisdiction
over Scott’s claim because res judicata and collateral estoppel apply. The Supreme
Court has stated that “[p]reclusion, of course, is not a jurisdictional matter.” Exxon
Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 293 (2005); see also In re
Athens/Alpha Gas Corp., 715 F.3d 230, 235 (8th Cir. 2013) (stating that res judicata
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is a “non-jurisdictional question”). Because preclusion is not a jurisdictional matter,
the district court erred when it found that res judicata and collateral estoppel were
sufficient grounds to grant a Rule 12(b)(1) motion. Rather, Rule 12(b)(6) or Rule 56
motions are the more appropriate vehicles for a dismissal based on preclusion.
See A.H. ex rel. Hubbard v. Midwest Bus Sales, Inc., 823 F.3d 448, 453 (8th Cir.
2016) (Rule 12(b)(6)); Smith v. United States, 369 F.2d 49, 53 (8th Cir. 1966) (Rule
56).
The district court also found it lacked subject matter jurisdiction based on
Rooker-Feldman. To the extent that Scott is a “state court loser” who is challenging
the state court’s order for his accounting claims to be arbitrated, we agree with the
district court that Rooker-Feldman would apply, barring his claim in federal court.
See Exxon Mobil, 544 U.S. at 284. However, we think that it is unnecessary to reach
the question of whether Rooker-Feldman applies here because the arbitration to
which Scott was ordered to submit has already been completed. Thus, on remand the
district court may hear a challenge to the enforcement of the arbitration award, but
may not consider whether the state court’s order to arbitrate accounting claims was
appropriate. Furthermore, for the same reasons, we find it is unnecessary to consider
Intervenors’ appeal of the denial of their motion to intervene.
III. Conclusion
We reverse and remand to the district court for further proceedings consistent
with this opinion.
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