Bollinger Shipyards Lockport, LLC v. NAIAD Inflatables of Newport, Inc.

Filing 19

ORDER AND REASONS granting in part, denying in part 8 MOTION to Compel Arbitration and to Dismiss, or in the Alternative, to Stay Proceeding; The motion is GRANTED insofar as the Court orders arbitration, and this matter is hereby STAYED and CLOSED for administrative purposes pending such arbitration. The motion is DENIED as to NAIAD's motion to dismiss the case. Signed by Judge Eldon E. Fallon on 6/3/2015.(blg)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA

BOLLINGER SHIP YARDS LOCKPORT, LLC

CIVIL ACTION

VERSUS

NO. 15-545

NAIAD INFLATABLES OF NEWPORT, INC.

SECTION "L" (3)

ORDER & REASONS
Before the Court is Defendant NAIAD Inflatables of Newport, Inc.’s (“NAIAD”) Motion
to Compel Arbitration and to Dismiss, or in the Alternative, to Stay Proceedings. (Rec. Doc. 8).
Having reviewed the parties’ briefs and the applicable law, the Court now issues this Order &
Reasons.
I.

BACKGROUND
Plaintiff Bollinger Shipyards Lockport, LLC (“Bollinger”) filed suit against NAIAD in

the 17th Civil District Court for Parish of Lafourche. Bollinger alleges that Bollinger had a
contract with the United States Coast Guard to construct Fast Response Cutters, and in
connection to that contract, Bollinger subcontracted with NAIAD to equip the cutters with
twenty-one (21) feet rigid hill inflatable boats (“RHIB”). (Rec. Doc. 1-2 at 4). The subcontract
called for the construction of eighteen (18) RHIBs and two (2) spares for a total of twenty (20)
vessels. (Rec. Doc. 1-2 at 4). Bollinger claims that, in response to missed delivery dates,
Bollinger and NAIAD reached a settlement agreement in November 2012, entitled “Settlement
Agreement and Mutual Release” (“Disruption Agreement”), which called for Bollinger to make
a one-time payment of $400,000 to NAIAD for the delay damages; a revised delivery schedule;
and for Louisiana Law to govern disputes under the Disruption Agreement. (Rec. Doc. 1-2 at 4).

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Bollinger contends that although NAIAD was able to deliver the first eight vessels, NAIAD
continued to miss delivery deadlines, (Rec. Doc. 1-2 at 5). Bollinger avers that it ultimately
became evident that NAIAD would be unable to deliver the additional RHIBs. (Rec. Doc. 1-2 at
5). At this point, Bollinger contends it had made deposits for the additional twelve (12) vessels
totaling $1,468,950.00. (Rec. Doc. 1-2 at 5). Bollinger claims that NAIAD refused to return the
deposits, leading Bollinger to bring the present suit. Bollinger brings its claims under the
following theories of recovery: breach of contract; violations of Louisiana’s Unfair Trade
Practices and Consumer Protection Law, La R.S. § 51:1401, et seq.; and unjust enrichment.
(Rec. Doc. 1-2 at 6-8).
NAIAD removed this case pursuant to this Court’s diversity jurisdiction under 28 U.S.C.
1332. (Rec. Doc. 1 at 3). NAIAD denies the allegations and argues that the parties had
contractually agreed to resolve the disputes by arbitration. (Rec. Doc. 7 at 4). NAIAD also
pleads a variety of affirmative defenses, including impossibility of the performance under the
contract and estoppel. (Rec. Doc. 7 at 4).
II.

PRESENT MOTION (Rec. Doc. 8)
NAIAD filed the present motion and asks this Court to compel arbitration and dismiss the

case, or in the alternative, to stay the proceedings. In support of its motion, NAIAD argues that
the parties entered into a contract (“the Subcontract”), which requires that any dispute between
the parties be referred to arbitration. (Rec. Doc. 8-1 at 2). Accordingly, NAIAD contends that
the Court should refer the suit to arbitration pursuant to the Federal Arbitration Act (“FAA”), 9
U.S.C.A §§ 1 et seq. NAIAD also argues that this Court should dismiss Bollinger’s claims
because all of the issues raised by Bollinger arise under the Subcontract and must therefore be

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submitted to arbitration. (Rec. Doc. 8-1 at 4). NAIAD relies on Alford v. Dean Witter Reynolds,
Inc., a Fifth Circuit case, as support for this proposition. (Rec. Doc. 8-1 at 3).
Bollinger opposes the motion and argues that the parties entered into a separate and
binding agreement, the Disruption Agrement, which supersedes the Subcontract and does not
contain an arbitration clause. (Rec. Doc. 11 at 2). Bollinger argues that it “alleges breach of this
agreement and seeks remedies that were established by this agreement,” including liquidated
damages. Finally, if the Court does compel arbitration, Bollinger contends that dismissal is not
appropriate. (Rec. Doc. 11 at 3).
NAIAD replies and argues that Bollinger asserts claims under both the Subcontract and
the Disruption Agreement. Specifically, NAIAD avers that paragraphs 6, 7, and 8 references the
parties’ obligations under the Subcontract and paragraph 9 references the liquidated damages
clause in the Disruption Agreement. (Rec. Doc. 18 at 3). NAIAD notes that Bollinger’s claims
for breach of contract, unfair trade practices, and unjust enrichment cannot be exclusively traced
to the Disruption Agreement but also arise under the Subcontract. (Rec. Doc. 18 at 3). While
the terms of the arbitration clause may appear narrow, NAIAD avers that the clause is broad
when read in the broader context of the Subcontract. (Rec. Doc. 18 at 6). NAIAD thus argues
that the Court should construe the provision as broad, and the parties should arbitrate all disputes
that bear a “significant relationship” to the Subcontract. (Rec. Doc. 18 at 7).
NAIAD goes on to state “[w]here parties enter into multiple agreements with each other
that are integral and related parts of one deal, an arbitration clause, especially a broad one in one
of the agreements, may be found to cover disputes arising under a separate agreement that does
not contain an arbitration agreement.” (Rec. Doc. 18 at 7) (citing Trapp Chevrolet-OldsmobileCadillac, Inc. v. General Motors Corp., No. 02-158, 2002 WL 1163611, at *9-*15 (E.D. La.

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May 31, 2002) (Porteous, J.)). Here, NAIAD argues that the Subcontract governed the entire
transaction between the parties and the Disruption Agreement resolved a dispute that arose under
the Subcontract. (Rec. Doc. 18 at 8). Further, NAIAD contends that the Subcontract called for
such an agreement to resolve disputes and modify the Subcontract. NAIAD avers that
“Bollinger cannot validly argue that an agreement to resolve a dispute with NAIAD over
additional costs of construction somehow supersedes the provisions of the [Federal Acquisition
Regulation] and the requirements of the Subcontract.” (Rec. Doc. 18 at 10).
III.

LAW AND ANALYSIS

A. Motion to Compel Arbitration
Section 2 of the FAA provides, in relevant part, “a contract evidencing a transaction
involving commerce to settle by arbitration a controversy thereafter arising out of such contract
or transaction ... shall be valid, irrevocable, and enforceable....” 9 U.S.C. § 2. There is a strong
presumption in favor of arbitration for arbitrable disputes. See Moses H. Cone Mem'l Hosp. v.
Mercury Constr. Corp., 460 U.S. 1, 24 (1983); Bhatia v. Johnson, 818 F .2d 418, 421 (5th
Cir.1987) (citing Mitsubishi Motors Corp. v. Soler Chrysler–Plymouth, Inc., 473 U.S. 614
(1985)). When considering a motion to compel arbitration under the FAA, the court's inquiry
consists of three steps. See Mitsubishi Motors Corp, 473 U.S. at 626; Fleetwood Enters., Inc. v.
Gaskamp, 280 F.3d 1069, 1073 (5th Cir.2002). First, the court must determine whether a valid
agreement to arbitrate exists between the parties. Gaskamp, 280 F.3d at 1073. Next, it will
examine “whether the dispute in question falls within the scope of that arbitration agreement.”
Id. If the first two steps are answered affirmatively, the court must ultimately consider “whether
‘any federal statute or policy renders the claims nonarbitrable.’ ” Jones v. Halliburton Co., 583

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F.3d 228, 234 (5th Cir.2009) (quoting JP Morgan Chase & Co. v. Conegie ex rel. Lee, 492 F.3d
596, 598 (5th Cir.2007)).
The parties concede that the Subcontract contained a valid arbitration clause but dispute
whether the present suit falls within the scope of the arbitration clause or is subject to the Dispute
Settlement that does not contain an arbitration clause. The Subcontract’s arbitration clause
states: “Any dispute arising under this agreement that cannot be settled by the Parties under
the Dispute Resolution procedures, shall be referred to arbitration under the Rules of the Society
of Maritime Arbitrators, Inc.” Based on this language, the Court must determine whether the
arbitration clause is “narrow” or “broad.” It is well established that “narrow” clauses include the
language “arising out of the agreement,” and “broad” clauses often contain the term “arising out
of or in connection with this agreement.” See Pennzoil Exploration & Prod. Co. v. Ramco
Energy Ltd., 139 F.3d 1061, 1067-68 (5th Cir. 1998). A “narrow” clause only covers disputes
that literally arise under the contract, whereas “broad” clauses encompass all disputes that
“touch” the contract. See Id.at 1168 (“With such a broad arbitration clause, it is only necessary
that the dispute ‘touch’ matters covered by the [contract] to be arbitrable.”). “[W]henever the
scope of an arbitration clause is fairly debatable or reasonably in doubt, the court should decide
the question of construction in favor of arbitration.” Hornbeck, 981 F.2d at 755 (quoting Mar–
Len of La., Inc. v. Parsons–Gilbane, 773 F.2d 633, 635 (5th Cir.1985)). See also Webb v.
Investacorp, Inc., 89 F.3d 252, 258 (5th Cir.1996). “Arbitration should not be denied ‘unless it
can be said with positive assurance that an arbitration clause is not susceptible of an
interpretation that would cover the dispute at issue.” ’ Pennzoil, 139 F.3d at 1067 (quoting Neal
v. Hardee's Food Sys., Inc., 918 F.2d 34, 37 (5th Cir.1990)).

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Here, the arbitration clause includes the language “arising under the agreement,” which
would seemingly render the clause narrow. However, the Fifth Circuit has instructed that the
language of the arbitration clause should not be read in isolation, but rather in the context of the
agreement and in a way that avoids an absurd result. Baudoin v. Mid-Louisiana Anesthesia
Consultants, Inc., 306 Fed. Appx. 188, 192 (5th Cir. 2009). The arbitration clause states that
“[a]ny dispute arising under the Agreement that cannot be settled by the parties under the
Dispute Resolution Procedures…” (emphasis added). The language of the section entitled
“Dispute Resolution Procedures” states that “[a]ny disagreement, claim, or dispute between
BOLLINGER and SELLER as to questions of fact or law arising from or in connection with
this Contract.” (emphasis added). Under Fifth Circuit precedent, “arising out of or in
connection with this Contract” constitutes a broad arbitration clause. Since the arbitration clause
references that section and thereby incorporates that language, the Court finds that the clause is
sufficiently broad.
Since the Court finds that the arbitration clause is broad, it is only necessary for the
claims to “touch” the Subcontract for those claims to be subject to arbitration. As the Fifth
Circuit stated in Pennzoil, “[b]road arbitration clauses…are not limited to claims that literally
‘arise under the contract,’ but rather embrace all disputes between the parties having a significant
relationship to the contract regardless of the label attached to the dispute.” Pennzoil, 139 F.2d at
1067. In that case, the Fifth Circuit conceded that the plaintiff’s claim was based on a letter
agreement that did not contain an arbitration provision and not the parties’ Joint Operating
Agreement, which contained a broad arbitration clause. Nevertheless, the Fifth Circuit held that
the claim was subject to the arbitration clause because it “related to” the Joint Operating
Agreement. Id. The Fifth Circuit reached this conclusion and noted the “strong federal policy in

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favor of arbitration” and the fact that the dispute “flow[ed] from a series of interrelated
agreements.” Id.
The Court reaches the same the conclusion here. Bollinger’s claims all arise out of
NAIAD’s failure to timely deliver the RHIBs, contractual duties outlined by the Subcontract.
This is sufficient to find that the dispute is “related to” the Subcontract. Furthermore, while the
Disruption Agreement set forth new delivery dates and added a new liquidated damages clause,
it did not supersede the Subcontract. The Subcontract specifies that the parties should attempt to
resolve any disagreement, and the Disruption Agreement constitutes such a resolution as it
specifies that it is a settlement for the damages due to NAIAD caused by Bollinger’s delay of
twelve (12) of the Bollinger Purchase orders. (Rec. Doc. 11-1 at 1). Further, the referenced
purchase orders were based on the Subcontract. The Disruption Agreement is thus limited to
settling the damages arising from that delay and positioned the parties to proceed with their
contractual duties under the Subcontract with new delivery dates. Bollinger’s claims based on
NAIAD’s failure to meet the delivery dates of purchase orders, which the parties crafted under
the Subcontract, are thus “related to” the Subcontract and subject to the arbitration clause.
Even if the Court determined the clause was narrow, the Court would still conclude that
the dispute arises under the Subcontract. Bollinger’s Petition demands liquidated damages as
outlined in the Disruption Settlement, but the Petition also references other breaches of contract
and sums that arise under the Subcontract. (Rec. Doc. 1-2 at 6). For instance, Bollinger claims
that it is entitled to recover its deposits for the undelivered vessels in the amount of
$1,468,950.00, but that sum does not reference the Disruption Settlement nor can it be found in
the Disruption Settlement. Based on these facts, and with the principle in mind that the Court

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should err on the side of arbitration when the scope of the arbitration clause is debatable, it is
evident that the claims fall within the scope of the Subcontract’s arbitration clause.
Looking to the third step of the Court’ inquiry, the Court concludes that no federal statute
or policy renders the claim nonarbitrable. Accordingly, the Court will grant NAIAD’s motion to
compel arbitration.
B. Motion to Dismiss
NAIAD argues that this Court should dismiss rather than stay the case. The Court does
not agree. In Alfred v. Dean Witter Reynolds, Inc., the Fifth Circuit held that dismissal is
appropriate “when all of the issues raised in the district court must be submitted to arbitration.”
975 F.2d 1161, 1164 (5th Cir. 1992). Dismissal is within the discretion court’s discretion and is
not compulsory under those circumstances. Apache Bohai Corp., LDC v. Texaco China, B.V.,
330 F.3d 307, 311 n.9 (5th Cir. 2003). As one district court stressed, Alford presented the court
with unique circumstances and facts that made dismissal appropriate. Bilyeu v. Johanson
Berenson LLP, No. 08-2006, 2010 WL 3808375, at *2 (W.D. La. Sept. 27, 2010) (Drell, J.).
That district court stated:
as a result of the straightforward nature of the dispute, the welldeveloped record, the on point Supreme Court precedent, and the
frivolity of the Plaintiff's assertions, the Court in Alford was
uniquely able to discern prior to the commencement of
proceedings on the merits that all of the issues among all of the
parties were subject to arbitration, and ‘retaining jurisdiction ...
[would] serve no purpose.’
Id. At least one of Bollinger’s claims may not be arbitrable, specifically Bollinger’s claims for
liquidated damages, so the Court does not deem it appropriate to dismiss the case.

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IV.

CONCLUSION
For the aforementioned reasons, IT IS ORDERED that NAIAD’s Motion to Compel

Arbitration and to Dismiss, or in the Alternative, to Stay. (Rec. Doc. 8) is GRANTED IN
PART AND DENIED IN PART. The motion is GRANTED insofar as the Court orders
arbitration, and this matter is hereby STAYED and CLOSED for administrative purposes
pending such arbitration. The motion is DENIED as to NAIAD’s motion to dismiss the case.

New Orleans, Louisiana this 3rd day of June, 2015.

________________________________
UNITED STATES DISTRICT JUDGE

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