Bouchard Transportation Company, Inc. et al v. VT Halter Marine, Inc.

Filing 74

ORDER: ORDERED that Defendant VT Halter's 24 Motion to Compel Arbitration is Granted. FURTHER ORDERED that Plaintiffs' 67 Motion to Stay Arbitration isDENIED AS MOOT. Signed by Judge Nannette Jolivette Brown on 10/20/16. (clc)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
BOUCHARD TRANSPORTATION COMPANY,
INC., et al.

CIVIL ACTION

VERSUS

CASE NO. 16-11264

VT HALTER MARINE, INC., et al.

SECTION: “G” (2)
ORDER

In this litigation, Plaintiffs Bouchard Transportation Co., Inc., M/V Donna J. Bouchard
Corp., B. No. 272 Corp., M/V Kim M. Bouchard Corp., and B. No. 270 Corp. (“Plaintiffs”) allege
that Defendant VT Halter Marine, Inc. (“Defendant VT Halter”) breached a contract requiring
Defendant VT Halter to build a tugboat and barge for Plaintiffs when it installed “re-conditioned
and malfunctioning valves,” instead of new valves, onboard two vessels.1 Plaintiffs further allege
that Defendant VT Halter purchased the faulty valves from Defendants Cajun Process Solutions,
LLC and Flowline Valve and Controls, LLC.2 Pending before the Court is Defendant VT Halter’s
“Motion to Compel Arbitration”3 and Plaintiffs’ “Motion to Stay Arbitration.”4 Having reviewed
the motion, the memoranda in support and in opposition, the record, oral argument, and the
applicable law, the Court will grant Defendant VT Halter’s “Motion to Compel Arbitration” and
deny Plaintiffs’ “Motion to Stay Arbitration” as moot.

1

Rec. Doc. 33 at 3.

2

Id.

3

Rec. Doc. 24.

4

Rec. Doc. 67.

1

I. Background
A.

Factual Background
In their complaint, Plaintiffs allege that they entered into a contract with Defendant VT

Halter on February 13, 2013, requiring Defendant VT Halter to build two tug and barge units in
exchange for monetary compensation.5 Plaintiffs allege that Defendant VT Halter breached the
contract by installing reconditioned and faulty valves on each barge even though the contract
required that new valves be installed in the barges. 6 In June of 2016, Plaintiffs allege, they
experienced problems on both barges caused by the faulty valves.7 As soon as the problems began,
Plaintiffs notified Defendant VT Halter and gave it an opportunity to repair the problem, but
according to Plaintiffs, it failed to do so.8 Plaintiffs assert that as a result of the defective conditions
caused by the faulty valves, both barges have been rendered unsuitable for their intended use, and
Plaintiffs claim over $20 million in damages.9
B.

Procedural Background
Plaintiffs filed a complaint in this matter on June 22, 2016.10 On July 6, 2016, the Court

granted Plaintiffs leave to amend their complaint to expressly state the citizenship of Defendant
VT Halter. 11 On July 19, 2016, Plaintiffs submitted a motion to Magistrate Judge Joseph C.

5

Rec. Doc. 33 at 3.

6

Id.

7

Id.

8

Id. at 4.

9

Id.

10

Rec. Doc. 1.

11

Rec. Doc. 8.

2

Wilkinson for leave to file a third amended and supplemental complaint for declaratory relief and
damages,12 which Judge Wilkinson granted on August 3, 2016.13 On July 26, 2016, Defendant
VT Halter filed the instant motion to compel arbitration.14 On August 8, 2016, Plaintiffs filed an
opposition to the motion to compel arbitration.15 With leave of the Court, Defendant VT Halter
filed a reply.16 On October 14, 2016, Plaintiffs filed a motion to stay arbitration, a request for oral
argument, and a motion for expedited consideration of the motion to stay arbitration.17 The Court
granted Plaintiffs’ motion for expedited consideration and heard oral arguments on October 19,
2016.18
II. Parties’ Arguments
A.

Defendant VT Halter’s Motion to Compel Arbitration
1. Defendant’s Arguments in Support of the Motion to Compel
In its motion to compel arbitration,19 Defendant VT Halter argues that Plaintiffs’ claims

are “plainly subject to the arbitration provision” in the contract that the parties executed on
February 13, 2013.20 Consequently, Defendant VT Halter argues, Plaintiffs’ complaint should be

12

Rec. Doc. 19.

13

Rec. Doc. 32.

14

Rec. Doc. 24.

15

Rec. Doc. 39.

16

Rec. Doc. 45.

17

Rec. Docs. 67, 68, 69.

18

Rec. Doc. 70.

19

Rec. Doc. 24.

20

Rec. Doc. 24-1 at 2.

3

dismissed and its claims against Defendant VT Halter must be resolved by arbitration.21 Defendant
VT Halter asserts that the parties expressly agreed that disputes among the parties are to be
resolved either through negotiations among executive level personnel (for non-technical disputes)
or by a jointly appointed “ABS surveyor.”22 If any dispute cannot be resolved through either of
the foregoing manners, Defendant VT Halter argues, “then they shall be resolved through
arbitration.” 23 Defendant VT Halter asserts that the broad language of the contract created a
binding obligation to utilize arbitration, rather than the court system, for determining contractual
disputes.24
Defendant VT Halter asserts that determination of a motion to compel arbitration depends
on two conditions: 1) whether there is a valid agreement between the parties and 2) whether the
dispute in question falls within the scope of that agreement.25 Defendant VT Halter argues that
even technical disputes fall within the broad scope of the valid agreement between the parties.26
Defendant VT Halter rejects Plaintiffs’ argument that the agreement does not apply to technical
disputes and argues that Plaintiffs should have, but never did seek a resolution of the technical
dispute by submitting it to an ABS surveyor. 27 Even if an ABS surveyor was not available,
Defendant VT Halter argues, the language in the contract expressly provides that in the event a

21

Id. at 5.

22

Id. Although neither party explains this acronym, it appears they are referring to an American Bureau of
Shipping surveyor.
23
24

Id. (emphasis in original).
Id. at 6.

25

Id. (citing Fleetwood Enterprises, Inc. v. Gaskamp, 280 F.3d 1069 (5th Cir. 2002)).

26

Id. at 7.

27

Id.

4

surveyor is unable to resolve a technical dispute, the parties shall submit the dispute to binding
arbitration.28 Even if the dispute was “arguably arbitrable,” Defendant VT Halter argues, it must
be referred to arbitration.29
Next, Defendant VT Halter asserts that the parties expressly incorporated the Commercial
Arbitration Rules of the American Arbitration Association (“AAA”) into their arbitration
agreement and have agreed to arbitrate, not litigate, arbitrability.30 Defendant VT Halter asserts
that Rule 7(a) of the AAA Rules expressly states that “the arbitrator shall have the power to rule
on his or her own jurisdiction, including any objections with respect to the existence, scope or
validity of the arbitration agreement.”31 According to Defendant VT Halter, the Fifth Circuit and
Second Circuit (applying New York law, the governing law of the contract), as well as several
other circuits, have held that the express adoption of the AAA rules presents clear evidence that
the parties agreed to arbitrate the issue of arbitrability if disputed.32 Accordingly, Defendant VT
Halter argues, it is for the arbitration panel, not the Court, to determine whether the disputes at
issue are, in fact, arbitrable.33 Defendant VT Halter argues that Plaintiffs, as the parties resisting
arbitration, have the burden of proving the disputes are not arbitrable, which they have failed to
do.34
28

Id.

29

Id. (citing Waverly Mineral Products Co. v. United Steelworkers of America, AFL-CIO, Local No. 8209,
633 F.2d 682, 684 (5th Cir. 1980)).
30

Id. at 8.

31

Id.

32

Id. (see, e.g., Petrofac, Inc. v. DynMcDermott Petroleum Operations Co., 687 F.3d 671, 675 (5th Cir.
2012); Contec Corp. v. Remote Solution Co., 398 F.3d 205, 208 (2d Cir. 2005)).
33

Id.

34

Id. at 8–9 (citing Am. Heritage Life Ins. Co. v. Lang, 321 F.3d 533, 539 (5th Cir. 2003)).

5

Finally, Defendant VT Halter argues in the alternative that the Court should stay Plaintiffs’
claims in favor of arbitration in accordance with the contract and Section 3 of the Federal
Arbitration Act (“FAA”).35 Defendant VT Halter argues that Section 3 of the FAA provides for a
stay of legal proceedings whenever the issues in a case are within the scope of an arbitration
agreement and that this provision is mandatory.36 According to Defendant VT Halter, where there
is a written agreement to arbitrate and the issues raised are within reach of that agreement, the
Court has no discretion under Section 3 of the FAA to deny the stay.37 Thus, because Plaintiffs’
claims fall within the scope of the agreement, Defendant VT Halter argues, that the Court has no
discretion to deny the stay and must grant Defendant VT Halter’s request to stay all claims pending
arbitration or dismiss Plaintiffs’ claims.38
2. Plaintiffs’ Arguments in Opposition to the Motion to Compel
In their opposition to Defendant VT Halter’s motion to compel arbitration, Plaintiffs argue
that the Court is the proper body to determine whether the parties agreed to arbitrate a particular
grievance.39 Plaintiffs further argue that the “intent of the arbitration provision” in the contract did
not apply to claims like theirs “unless the condition precedent of the joint appointment of an ABS
surveyor by both parties was met.” 40 Because the parties did not appoint an ABS surveyor,
Plaintiffs argue, the arbitration provision does not apply and the Court should deny Defendant VT

35

Id. at 9 (citing 9 U.S.C.A. § 3).

36

Id. (citing Complaint of Hornbeck Offshore (1984) Corp., 981 F.2d 752, 754 (5th Cir. 1993)).

37

Id. (citing Hornbeck Offshore, 981 3.Fd at 754).

38

Id. at 9–10.

39

Rec. Doc. 39 at 2 (citing Oil, Chemical and Atomic Workers’ Intern. Union, Local 4-4447 v. Chevron
Chemical Co., 815 F.2d 338, 340 (5th Cir. 1987)).
40

Id.

6

Halter’s motion to compel arbitration, issue an order staying arbitration proceedings, and proceed
with hearing the parties’ claims.41
Plaintiffs next argue that New York law governs the contract and that New York law holds
that questions of arbitrability are for the judiciary to decide, not an arbitrator.42 Plaintiffs further
urge that the instant dispute is a technical dispute and is, therefore, not subject to arbitration under
the plain language of the contract. 43 Because, Plaintiffs argue, the two condition precedents
outlined in the contract (appointment of a ABS surveyor and inability of the surveyor to resolve
the technical dispute) were not satisfied, the instant technical dispute is outside the scope of the
arbitration agreement.44 Plaintiffs argue that New York law mandates a judicial determination of
whether this dispute falls outside the scope of the arbitration agreement, because the “threshold
determination of whether a condition precedent to arbitration exists and whether it has been
complied with is for the court to determine.”45 Plaintiffs argue that because neither Plaintiffs nor
Defendant VT Halter appointed an ABS surveyor within the five day time period required in the
contract, a condition precedent to arbitration was not met, and the contract is clear that the parties
did not intend to go to arbitration failing this condition precedent.46
Next, Plaintiffs contest Defendant VT Halter’s argument that the parties must arbitrate

41

Id.

42
Id. at 7 (citing Smith Barney Shearson, Inc. v. Sacharow, 689 N.E.2d 884 (N.Y. 1997); Nationwide Gen.
Ins. Co. v. Inv’rs Ins. Co., 332 N.E.2d 333 (N.Y. 1975); Legislature of Cty. Of Rensselaer v. Allen, 353 N.Y.S.2d
554 (App. Div. 1974)).
43

Id. at 8.

44

Id.

45

Id. (quoting Incorporated Village of Floral Park v. Floral Park Police Benevolent Ass’n, 17 N.Y.S.3d
463, 466 (App. Div. 2015)).
46

Id. at 12.

7

because they incorporated the American Arbitration Association (“AAA”) rules into the contract.47
Because the condition precedent to submitting the technical dispute to arbitration did not occur,
Plaintiffs argue, the “triggering event for the matter to be submitted to arbitration under the AAA
rules” has not occurred. 48 As a result, Plaintiffs contend, Rule 7(a) of the AAA granting the
arbitrator the power to determine his or her own jurisdiction does not apply.49 Even if the AAA
rules were in effect, Plaintiffs argue, the AAA rules allow parties to create modified rules by
written agreement, and here, Plaintiffs argue that the parties did just that when they agreed in
writing to arbitrate only non-technical disputes or disputes unable to be resolved by a ABS survey
appointed within five days of a dispute.50 Plaintiffs also argue that the FAA does not mandate a
stay of Plaintiffs’ claims against Defendant VT Halter, because Plaintiffs’ claims do not fall within
the scope of the arbitration agreement.51 Plaintiffs contend that in ruling on a motion to stay, the
Court must first determine whether there is a written agreement to arbitrate and whether any of the
issues raised are within reach of that agreement.52
Finally, Plaintiffs argue that the arbitration proceedings instituted by Defendant VT Halter
should be stayed pending the Court’s determination of arbitrability.53 Plaintiffs argue that the
instant case is similar to a New York case in which a New York appellate court stayed arbitration

47

Id.

48

Id. at 13.

49

Id.

50

Id.

51

Id. at 13–14.

52

Id. (citing Cargill Ferrous Intern. V. M/V Anatoli, 935 F.Supp. 833, 837 (E.D. La. 1996) (citing
Hornbeck Offshore, 981 F.2d at 754)).
53

Id. at 14.

8

proceedings that had been prematurely instituted when a condition precedent had not been met.54
Moreover, Plaintiffs contend that a second reason for staying the arbitration proceedings is that
Defendant VT Halter has instituted a separate proceeding against Defendants Cajun Process and
Flowline in this Court.55 In light of the pending claims against non-signatory Defendants Cajun
Process and Flowline, Plaintiffs argue, the Court should retain jurisdiction over all of the claims
or alternatively, stay the arbitration proceedings until the non-arbitrable claims against the nonsignatories are decided by the Court.56
3. Defendant VT Halter’s Reply in Support of the Motion to Compel
In its reply, Defendant VT Halter argues that incorporation of the AAA rules into the
contract serves as clear evidence of the parties’ intent to submit questions of arbitrability to
arbitration.57 Defendant VT Halter further argues that Plaintiffs confuse the question of which
body gets to decide questions of arbitrability with the question of arbitrability itself.58 Defendant
VT Halter contests Plaintiffs’ assertion that questions of arbitrability are for the judiciary to decide,
because, Defendant VT Halter argues, the New York case Plaintiffs rely on for that assertion
recognizes that an exception to that rule exists where the parties “clearly and unmistakably” agree
to arbitrate the issue of arbitrability.59
Defendant VT Halter likewise disagrees with Plaintiffs’ assertion that the technical dispute

54

Id. (citing N.Y. Tel.Co. v. Schumacher & Forelle, Inc., 400 N.Y.S.2d 332 (App. Div. 1977)).

55

Id. at 15. See VT Halter Marine, Inc. v. A&C Machine, Inc. et al. (16-12823).

56

Id.

57

Rec. Doc. 45 at 3.

58

Id. at 4.

59

Id. (citing Smith Barney Shearson, Inc., 91 N.Y.2d at 39).

9

at issue cannot be submitted to arbitration because there was no timely appointment of an ABS
surveyor. The failure to appoint an ABS surveyor, Defendant VT Halter argues, constitutes a
procedural condition precedent.60 Once a court determines that the parties are obligated to submit
the subject matter of a dispute to arbitration, Defendant VT Halter argues, “procedural questions
which grow out of the dispute and bear on its final disposition should be left to the arbitrator.”61
Here, Defendant VT Halter argues, there is no dispute that the agreement provides that technical
disputes shall be submitted to arbitration if it cannot be resolved by an ABS surveyor, and the fact
that there was no timely appointment of an ABS surveyor does not mean that the parties’ dispute
goes to litigation. Rather, the issue of timeliness should be addressed by the arbitration panel.62
Next, Defendant VT Halter argues that Plaintiffs evidently refused to seek ABS surveyor
resolution of the instant dispute, but this does not mean that the dispute proceeds to litigation rather
than arbitration.63 Defendant VT Halter argues that it requested that Plaintiffs comply with the
procedural requirement for submission of the dispute to an ABS surveyor as soon as Plaintiffs
alerted Defendant VT Halter that the damage alleged qualified as a technical dispute, but,
Defendant VT Halter alleges, Plaintiffs refused to do so.64 There is no time limitation on the
parties’ agreement, Defendant VT Halter argues, and the fact that five days have passed since the
dispute arose does not bar the resolution of the claim by an ABS surveyor per the parties’

60

Id.

61
Id. at 5 (quoting Chevron Chemical Co., 815 F.2d at 340 (citing John Wiley & Sons, Inc. v. Livingston,
376 U.S. 543 (1964)).
62

Id. at 6.

63

Id.

64

Id. at 8.

10

agreement. 65 The Court should grant the motion to compel arbitration, Defendant VT Halter
argues, as Plaintiffs should not be able to benefit from its own breach of the contract by refusing
to enlist an ABS surveyor to resolve the dispute.66 Finally, Defendant VT Halter argues that even
if the Court finds that the parties’ technical dispute is not subject to arbitration, the Arbitration
Panel nevertheless has “exclusive jurisdiction” over the parties’ non-technical claims. 67 Thus,
even if the Court declines to compel Plaintiffs to arbitrate the technical dispute until after it has
been submitted to an ABS surveyor for resolution, Defendant VT Halter argues, the Court should
still “rigorously enforce” the parties’ mutual agreement to resolve all other claims through the
pending arbitration proceeding.68
4. Plaintiffs’ Supplemental Brief in Opposition to the Motion to Compel
In their supplemental brief in opposition to the motion to compel,69 Plaintiffs alert the
Court that the parties have agreed to fully stay the arbitration proceeding instituted by Defendant
VT Halter pending the Court’s determination on the motion to compel arbitration and attached
email correspondence that they argue demonstrate that the agreement to stay arbitration occurred.70
5. Defendant VT Halter’s Supplemental Brief in Support of the Motion to Compel
In its supplemental brief, Defendant VT Halter asserts that the arbitration proceeding is
not “fully stayed,” but rather that the process for selecting and empaneling the arbitration panel is

65

Id.

66

Id. at 9.

67

Id. at 10.

68

Id.

69

Rec. Doc. 51.

70

Rec. Doc. 51-1.

11

currently ongoing.71 Defendant VT Halter further clarifies that it has only brought claims against
Plaintiffs in the arbitration proceeding, not in this Court.72 Additionally, Defendant VT Halter
restated its objection to Plaintiffs’ request for a stay, because, according to Defendant, Plaintiffs
had not properly filed a motion for a stay as of August 24, 2016, but had only urged the Court to
grant a stay in its opposition to Defendant VT Halter’s motion to compel arbitration.73 Finally,
Defendant VT Halter argues that the dispute at issue is not a technical dispute, but rather a
contractual dispute between the parties subject to arbitration.74
B.

Plaintiffs’ Motion to Stay Arbitration
1. Plaintiffs’ Arguments in Support of the Motion to Stay Arbitration
In their motion, 75 Plaintiffs state that Defendant VT Halter has instituted a separate

American Arbitration Association (AAA) arbitration proceeding against Plaintiffs instead of
bringing a counterclaim in this proceeding. 76 Plaintiffs argue that they have requested a
declaratory judgment from the Court recognizing that the instant contractual dispute does not fall
within the scope of the limited arbitration provision contained in the applicable contract and that
this Court is the proper body to determine whether the parties agreed to arbitrate—not the AAA.77
Plaintiffs assert that after Defendant VT Halter filed a motion to compel arbitration, counsel for

71

Rec. Doc. 53 at 1–2.

72

Id. at 2.

73

Id.

74

Id. at 3.

75

Rec. Doc. 67.

76

Rec. Doc. 67-1 at 2.

77

Id. at 3.

12

Plaintiffs and Defendant VT Halter came to an agreement that the arbitration proceeding instituted
by Defendant VT Halter would be stayed until the Court ruled on Defendant VT Halter’s motion
to compel.78 Now, according to Plaintiffs, “in violation of this agreement to stay the arbitration
proceeding, and . . . in violation of applicable jurisprudence,” Defendant VT Halter is attempting
to move forward with the arbitration proceeding.79 Plaintiffs argue that the Court should stay
arbitration to prevent “irreparable harm” to Plaintiffs and because it “would not make practical
sense to begin arbitration now.”80
Plaintiffs argue that in their previous briefing they cited binding case law that “squarely
establishes” that the Court must first determine if the arbitration provision at issue applies to the
claims brought by the parties before they are required to arbitrate.81 Plaintiffs further argue that
the arbitration provision in the contract at issue explicitly carves out an exception for “technical
disputes” like the instant dispute. 82 Because certain condition precedents have not been met,
Plaintiffs argue, the arbitration provision does not apply.83
Next, Plaintiffs argue that Defendant VT Halter would not be harmed by a stay of the
arbitration, because it has not paid or reimbursed Plaintiffs for any damages. On the other hand,
Plaintiffs argue, they will be irreparably harmed if the arbitration proceeding is allowed to go

78

Id.

79

Id.

80

Id.

81

Id. at 4 (citing Rec. Docs. 22, 39).

82

Id.

83

Id. (citing Rec. Docs. 22, 39).

13

forward.84 Plaintiffs assert that the parties agreed to stay the arbitration proceeding during the
pendency of Defendant VT Halter’s motion to compel arbitration. 85 Despite Defendant VT
Halter’s suggestion that the agreement states that arbitration would go forward if the Court did not
rule on its motion by mid-October, Plaintiffs argue that a plain reading of the parties’ agreement
shows that “no agreement to arbitrate was ever contemplated should the Court fail to rule by midOctober.”86
Plaintiffs assert that New York law governs disputes of the contract at issue and that New
York jurisprudence mandates that a stay or injunction of arbitration be issued while the Court
determines whether the parties’ claims are arbitrable.87 In Halley Optical Corp. v. Jagar Intern.
Marketing Corp., Plaintiffs argue, the Southern District of New York set forth the general rule
stating that the proper procedure for a party to challenge whether it is subject to an arbitration
agreement is to move the district court for a stay of arbitration.88 Plaintiffs further note that the
Eighth Circuit, 89 the Fifth Circuit, 90 and district courts within the Fifth Circuit 91 have also
recognized the power of a district court to issue a stay pending the court’s determination of whether

84

Id.

85

Id. at 5.

86

Id.

87

Id.

88

Id. (citing 752 F.Supp. 638, 639 (S.D.N.Y. 1990)).

89

Id. at 6 (citing McLaughlin Gormley King co. v. Terminix Intern. Co., L.P., 105 F.3d 1192 (8th Cir.
2014); Daisy Mfg. Co. v. NCR Corp., 29 F.3d 389, 392 (8th Cir. 1994)).
90

Id. at 7 (citing Tai Ping Ins. Co., Ltd. V. M/V Warschau, 731 F.2d 1141, 1144 (5th Cir. 1984)).

91

Id. at 6 (citing Koman v. Weingarten/Investments, Inc., No. H-10-1836, 2010 WL 3717312, at *1 (S.D.
Tex. Sept. 17, 2010); Garner v. MBNA America Bank, N.A., No. 3:05CV1029-R, 2006 WL 2354939, at *1 (N.D.
Tex. Aug. 14, 2006); Higman Marine Services, Inc. v BP Amoco Chemical Co., 114 F. Supp. 2d 693, 600 (S.D. Tex.
2000)).

14

a particular dispute is subject to arbitration.
Alternatively, Plaintiffs argue, the Court should enter a preliminary injunction until the
Court makes a determination of arbitrability.92 Plaintiffs also point to a Second Circuit decision
upholding the grant of a preliminary injunction enjoining further arbitration proceedings while the
arbitrability of the dispute was being litigated.93 Plaintiffs assert that they must demonstrate the
following in order to show they are entitled to a preliminary injunction: 1) a substantial likelihood
that Plaintiffs will prevail on the merits; 2) a substantial threat that Plaintiffs will suffer irreparable
injury if the injunction is not granted; 3) Plaintiffs’ threatened injury outweighs the threatened
harm to Defendant VT Halter; and 4) granting the preliminary injunction will not disserve the
public interest.94
Plaintiffs argue that they meet all four requirements for a preliminary injunction. Plaintiffs
argue that they have demonstrated through “this pleading and a plethora of prior pleadings” that
they will succeed on the merits.95 Plaintiffs further assert that the Eighth Circuit and Southern
District of Texas have recognized that forcing a party to arbitrate an issue he never agreed to
arbitrate constitutes irreparable injury. 96 Plaintiffs argue that the threatened harm to them
outweighs Defendant VT Halter’s threatened injury, because the only harm that could come to
Defendant VT Halter if a preliminary injunction was granted is that it would have to wait for a

92

Id. at 7.

93

Id. (citing Citigroup Global Markets, Inc. v. VCG Special Opportunities Master Fund, Ltd., 598 F.3d 30
(2d Cir. 2010)).
94

Id. (citing Koman, 2010 WL 3717312, at *8 (quoting Bluefield Water Ass’n, Inc. v. City of Starkville,
Miss., 577 F.3d 250, 252-53 (5th Cir. 2009)).
95

Id. at 8.

96

Id. (citing McLaughlin, 105 F.3d at 1194; Koman, 2010 WL 3717312, at *3)).

15

judicial determination of arbitrability.97 Finally, Plaintiffs argue that there is a strong public policy
against holding a party to a contract to which he or she did not agree, so the public interest weighs
in their favor.98
In Plaintiffs’ final argument in support of their motion to stay arbitration, Plaintiffs argue
that the fact that non-parties to the arbitration agreement are part of this litigation weighs in favor
of a stay or injunction of the arbitration proceeding. 99 Plaintiffs note that Defendants Cajun
Process and Flowline are non-signatories to the arbitration provision and thus cannot be forced to
arbitrate. 100 In the interest of judicial economy, Plaintiffs argue, the Court should retain
jurisdiction over all of the claims involved in this dispute to avoid inconsistent judgments. 101
Alternatively, Plaintiffs argue, if the Court requires Plaintiffs and Defendant VT Halter to arbitrate,
arbitration should be stayed or enjoined until the non-arbitrable claims against non-signatory
Defendants have been decided by the Court.102
2. Defendant VT Halter’s Arguments in Opposition to the Motion to Stay
In its opposition, Defendant VT Halter asserts that the pending arbitration proceeding does
not encompass the claims that Plaintiffs have asserted against Defendant VT Halter, but rather
only encompasses Defendant VT Halter’s claims against Plaintiffs. 103 Defendant VT Halter

97

Id.

98

Id. (citing Koman, 2010 WL 3717312, at *10 (citing First Options of Chicago, Inc. v. Kaplan, 514 U.S.
938, 947 (1995)).
99
100
101

Id. at 9.
Id.
Id.

102

Id. at 10.

103

Rec. Doc. 72 at 1.

16

emphasizes that the only claims subject to the pending arbitration proceeding are Defendant VT
Halter’s claims of payment breach and damages resulting from Plaintiffs’ improper assertion of
warranty rights against Defendant VT Halter.104 These claims, Defendant VT Halter argues, are
separate and distinct from the “technical dispute” regarding the defectiveness of the valves,
undoubtedly arise out of the contract, and are the only claims pending in the arbitration
proceeding.105 At no point, Defendant VT Halter argues, have Plaintiffs contested the arbitrability
of Defendant VT Halter’s claims against Plaintiffs.106 Defendant VT Halter further notes that it
informed Plaintiffs that it would not agree to an indefinite stay and specifically informed Plaintiffs
that if the Court did not rule on the motion to compel arbitration by mid-October, Defendant VT
Halter may have to reconsider moving forward with arbitration.107
Defendant VT Halter further argues that the parties mutually agreed to the incorporation
of a “broad, plainly worded, unambiguous arbitration clause” in the contract and that there is a
strong presumption favoring arbitration.

108

Moreover, Defendant VT Halter argues, the

incorporation of the AAA rules serves as clear and unmistakable evidence of the parties’ intent to
submit the threshold question of arbitrability to arbitration.109 Defendant VT Halter argues that
the Plaintiffs cite only one case, Oil, Chemical and Atomic Workers’ Intern. Union, Local 4-447
v. Chevron Chemical Co., to support its argument that the Court is the proper party to determine

104

Id. at 5.

105

Id.

106

Id.

107

Id. at 7.

108

Id. at 8–9.

109

Id. at 10.

17

the threshold arbitrability inquiry. 110 According to Defendant, that case is inapplicable here
because the parties in that case did not explicitly agree to have questions of arbitrability decided
by the arbitration panel thorugh the incorporation of AAA or similar rules.111
Finally, Defendant VT Halter argues that the arbitration panel, not this Court, has
jurisdiction to adjudicate Plaintiff’s present claim for injunctive relief and that under Fifth Circuit
precedent, Plaintiffs do not meet the requirements for a preliminary injunction. 112 Instead,
Defendant VT Halter argues, the Court should grant Defendant VT Halter’s request to stay all
claims made by Plaintiffs against Defendant VT Halter pending arbitration, because Section 3 of
the FAA provides for a stay of legal proceedings whenever the issues in a case are within the reach
of an arbitration agreement.113 Because, Defendant VT Halter argues, there is a written agreement
to arbitrate and Plaintiffs’ allegations fall within reach of that agreement, the Court should issue a
stay of Plaintiffs’ claims.114
III. Law and Analysis
A.

Whether the Federal Arbitration Act Applies to this Dispute
In Iberia Credit Bureau, Inc. v. Cingular Wireless LLC, the United States Court of Appeals

for the Fifth Circuit explained that the FAA was “in large part motivated by the goal of eliminating
the courts’ historic hostility to arbitration agreements.” 115 Thus, “Section 2 of the FAA puts

110

Id. at 12 (citing 815 F.2d 338, 340 (5th Cir. 1987)).

111

Id.

112

Id. at 13 (citing Bluefield, 577 F.3d at 252-53).

113

Id. at 15.

114

Id.

115

379 F.3d 159, 166 (5th Cir. 2004) (citations omitted).

18

arbitration agreements on the same footing as other contracts.”116 This means that, “as a matter of
federal law, arbitration agreements and clauses are to be enforced unless they are invalid under
principles of state law that govern all contracts.”117
In resolving the motion presently before the Court, it is first necessary to determine whether
the action falls within the scope of the FAA. On this point, the FAA, as codified at 9 U.S.C. §§ 1–
2, provides the basis for the Court’s inquiry. Section 2 states that:
A written provision in any maritime transaction or a contract evidencing a
transaction involving commerce to settle by arbitration a controversy
thereafter arising out of such contract or transaction, or the refusal to perform
the whole or any part thereof, or an agreement in writing to submit to arbitration
an existing controversy arising out of such a contract, transaction, or refusal, shall
be valid, irrevocable, and enforceable, save upon such grounds as exist at law
or in equity for the revocation of any contract.118
Section 1 defines “commerce” as meaning “commerce among the several States or with foreign
nations.” 119 In Perry v. Thomas, the United States Supreme Court concluded that the FAA
“provide[s] for the enforcement of arbitration agreements within the full reach of the Commerce
Clause [of the United States Constitution].”120
The FAA, as codified at 9 U.S.C. § 3, gives federal courts authority to stay litigation
pending arbitration; it provides as follows:
If any suit or proceeding be brought in any of the courts of the United States upon
any issue referable to arbitration under an agreement in writing for such
arbitration, the court in which such suit is pending, upon being satisfied that
116

Id.

117

Id.

118

9 U.S.C. § 2 (emphasis added).

119

9 U.S.C. § 1.

120

482 U.S. 483, 490 (1987). In Perry, the Supreme Court held that § 2 of the FAA preempted a California
statute that provided a judicial forum for actions seeking to collect wages, notwithstanding any arbitration agreement
between the parties. Id. at 484, 492.

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the issue involved in such suit or proceeding is referable to arbitration under
such an agreement, shall on application of one of the parties stay the trial of
the action until such arbitration has been had in accordance with the terms of the
agreement, providing the applicant for the stay is not in default in proceeding with
such arbitration.121
As the United States Court of Appeals for the Fifth Circuit has observed, Section 3 of the FAA is
mandatory, providing that federal courts “shall on application of one of the parties stay the trial of
the action.”122
Section 4 of the FAA covers motions to compel arbitration; it provides:
A party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate
under a written agreement for arbitration may petition any United States district
court, save for such agreement, would have jurisdiction under Title 28, in a civil
action or in admiralty of the subject matter of a suit arising out of the controversy
between the parties, for an order directing that such arbitration proceed in the
manner provided for in such agreement.123
In this case, the parties agree that the contract includes an arbitration clause.124 Plaintiffs
nevertheless contend that the FAA does not apply to this particular dispute because of the failure
to appoint an ABS surveyor. However, Plaintiffs have failed to identify any language from the
contract that suggests the FAA no longer applies if an ABS surveyor is not appointed. Even
assuming, as Plaintiffs argue, that the arbitration clause was never triggered because of the failure
to meet a condition precedent, it does not follow that the FAA ceases to apply to the contract.

121

9 U.S.C. § 3 (emphasis added).

122

Waste Mgmt, Inc. v. Residuos Industriales Multiquim, S.A. de C.V., 372 F.3d 339, 342–43, 346 (5th Cir.
2004) (construing 9 U.S.C. § 3, reasoning that “[t]he grammatical structure of this sentence would seem to make
clear that any of the parties to the suit can apply to the court for a mandatory stay, and the court must grant the stay
if the claim at issue is indeed covered by the arbitration agreement,” and ordering the district court to grant a
nonsignatory’s motion to compel arbitration).
123

9 U.S.C. § 4.

124

See Rec. Doc. 33 at 4–5; Rec. Doc. 24-1 at 2.

20

Defendant VT Halter and Plaintiffs agree that the contract contained a “written provision
. . . to settle by arbitration,” even if Plaintiffs dispute whether the arbitration clause was triggered.
The FAA applies to contracts evidencing a transaction involving commerce. Plaintiffs and
Defendant VT Halter are citizens of different states, and thus engaged in a transaction involving
interstate commerce.125 Accordingly, the Court concludes that the contract falls within the scope
of the FAA.
B.

Enforceability of the Arbitration Clause
The Supreme Court has made clear that there is a strong presumption in favor of

arbitrability,126 and thus, any doubts about the arbitrability of a dispute should be resolved in favor
of arbitration.127 To overcome this presumption, there must be clear evidence that the parties did
not intend the claim to be arbitrable.128 The Fifth Circuit has established a two-step inquiry to
determine if an arbitration clause is enforceable.129 First, a court determines whether the parties
agreed to arbitrate.130 This involves determining both whether there was a valid agreement to
arbitrate and whether the dispute in question falls within the scope of the arbitration clause.131
Second, a court determines whether any legal constraints external to the agreement foreclose the

125

Atl. Aviation, Inc. v. EBM Grp., Inc., 11 F.3d 1276, 1280 (5th Cir. 1994).

126

See E.E.O.C. v. Waffle House, 534 U.S. 279, 289 (2002).

127

See Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24–25 (1983).

128

Harvey v. Joyce, 199 F.3d 790, 793 (5th Cir. 2000).

129

Fleetwood Enters., Inc. v. Gaskamp, 280 F.3d 1069, 1073 (5th Cir. 2002).

130

Id.

131

Id.

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arbitration of claims.132
The FAA provides that a “written provision in . . . a contract . . . to settle by arbitration a
controversy thereafter arising out of such contract or transaction, or the refusal to perform the
whole or any part thereof . . . shall be valid, irrevocable, and enforceable, save upon such grounds
as exist at law or in equity for the revocation of any contract.”133 Section 2 of the FAA “is a
congressional declaration of a liberal federal policy favoring arbitration agreements,
notwithstanding any state substantive or procedural policies to the contrary.”134 “[T]he strong
federal policy favoring arbitration preempts state laws that act to limit the availability of
arbitration.” 135 More specifically, “the FAA will preempt any state laws that contradict the
purpose of the FAA by requir[ing] a judicial forum for the resolution of claims which the
contracting parties agreed to resolve by arbitration.”136
Here, the parties’ February 13, 2013, contract contains the following arbitration provision:
ARTICLE XVII - LAW APPLICABLE; DISPUTES; VENUE:
17.0 This Contract and any disputes arising hereunder shall be governed by the
Laws of the State of New York, U.S.A. In the event of any dispute arising in
connection with this Contract, the parties shall first attempt to amicably resolve the
dispute through negotiations among the parties' respective executive level
personnel.
17.1 With regard to any disputes of a technical nature ("Technical Disputes")
regarding whether any part of the Work has been completed in accordance with the

132

Id.

133

9 U.S.C. § 2.

134

Moses H. Cone, 460 U.S. at 24.

135
Saturn Distrib. Corp. v. Paramount Saturn, Ltd., 326 F.3d 684, 687 (5th Cir. 2003) (citing Southland
Corp. v. Keating, 465 U.S. 1, 16 (1984)).
136

Davis v. EGL Eagle Global Logistics L.P., 243 F. App’x 39, 44 (5th Cir. 2007) (quotations and citations

omitted).

22

applicable rules or regulations the parties agree that within five (5) days of such
dispute, the parties will jointly appoint an ABS surveyor to decide the matter.
17.2 Failing amicable resolution of disputes other than Technical Disputes, or in
the event that the ABS surveyor is unable to resolve the matter, the parties shall
submit the matter in dispute to binding arbitration in the United States of America
pursuant to the Commercial Arbitration Rules of the American Arbitration
Association.137
As noted above, the parties agree that the contract includes an arbitration clause, and the
parties do not argue that any external legal constraints foreclose the arbitration of the claims.138
Instead, Plaintiffs argue that the arbitration clause does not apply to the instant dispute, because
neither party ever appointed an ABS surveyor within five days of the dispute to decide the
matter. 139 The “intent of the arbitration provision” in the contract did not apply to technical
disputes like this one, Plaintiffs assert, “unless the condition precedent of the joint appointment of
an ABS surveyor by both parties was met.”140 Plaintiffs further contend that, under federal and
New York law, questions of arbitrability are for the Court to decide, not the arbitrator. 141
Defendant VT Halter contends that technical disputes fall within the broad scope of the valid
arbitration agreement between the parties, even if no ABS surveyor was ever appointed. 142
Defendant further argues that because the parties incorporated the AAA rules, the determination

137

Rec. Doc. 33 at 5; Rec. Doc. 24-1 at 5.

138

See Rec. Doc. 33 at 4–5; Rec. Doc. 24-1 at 2.

139

Rec. Doc. 33 at 4.

140

Rec. Doc. 39 at 2.

141
Id. at 7 (citing Smith Barney Shearson, Inc. v. Sacharow, 689 N.E.2d 884 (N.Y. 1997); Nationwide Gen.
Ins. Co. v. Inv’rs Ins. Co., 332 N.E.2d 333 (N.Y. 1975); Legislature of Cty. of Rensselaer v. Allen, 353 N.Y.S.2d 554
(App. Div. 1974)).
142

Rec. Doc. 24-1 at 2.

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of arbitrability must be left to the arbitration panel, not the Court.143
Here, Plaintiffs confuse the question of which body decides questions of arbitrability with
the question of arbitrability itself. Plaintiffs rely on a New York case, Smith Barney Shearson, Inc.
v. Sacharow,144 for the proposition that questions of arbitrability are for the judiciary to decide.
Although Smith Barney Shearson held that “the question of arbitrability is an issue generally for
judicial determination in the first instance,” the court also recognized that an “important legal and
practical exception has evolved which recognizes, respects and enforces a commitment by the
parties, nevertheless, to arbitrate even that issue when they clearly and unmistakably so
provide.”145 Here, the parties’ incorporation into the contract of the AAA rules, which require the
arbitrator to make determinations of arbitrability, clearly and unmistakably evidences the intent of
the parties to arbitrate the issue of arbitrability.
Plaintiffs’ reliance on Oil, Chemical and Atomic Workers’ Intern. Union, Local 4-4447 v.
Chevron Chemical Co.146 for the argument that the Court is the proper body to determine whether
the parties agreed to arbitrate this particular dispute is similarly unavailing. In Chevron Chemical
Co., the parties agreed that the substance of a party’s grievance was arbitrable but nevertheless
disputed the arbitrability of the dispute due to concerns regarding the timeliness of the request for
arbitration.147 In upholding the lower court’s determination that the parties had agreed to arbitrate

143

Id. at 8 (citing AAA Rule 7(a), which states that “the arbitrator shall have the power to rule on his or her
own jurisdiction, including any objections with respect to the existence, scope or validity of the arbitration
agreement.”)
144

91 N.Y.2d 39, 689 N.E.2d 884 (1997).

145

Id. at 45–46 (internal citations and quotation marks omitted).

146

815 F.2d 338 (5th Cir. 1987).

147

Id. at 339.

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the grievance at issue, the Fifth Circuit noted that the courts must determine which issues the
parties agreed to arbitrate.148 The Fifth Circuit went on to distinguish between “substantive and
procedural arbitrability.”149 Once a court determines that the parties are obligated to submit the
subject matter of a dispute to arbitration, the Fifth Circuit held, “procedural questions which grow
out of the dispute and bear on its final disposition should be left to the arbitrator.”150 The Fifth
Circuit concluded that “questions of timeliness are ones of procedural, not substantive,
arbitrability” and thus, “should be decided by an arbitrator if the underlying substantive claim is
arbitrable.”151 The Fifth Circuit further concluded that there could be a “rare” exception to this
rule where it could “confidently be said not only that a claim was strictly procedural . . . but also
that it should operate to bar arbitration altogether . . . .”152
Here, the parties agree that the underlying substantive claim, i.e. whether the valves were
defective, is an arbitrable issue. Plaintiffs nevertheless argue that the arbitration agreement does
not apply to the instant dispute because of the parties’ failure to timely appoint an ABS surveyor
to attempt to resolve the dispute.153 The failure to appoint an ABS survey within five days of the
dispute is an issue of timeliness and thus a question of procedural arbitrability for the arbitrator,
not the Court, to determine. Moreover, the relevant language in the parties’ contract states that “in

148

Id. at 340.

149

Id.

150

Id. (citing John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 557 (1964)) (internal quotations

omitted).
151

Id. at 341 (citing Local No. 406, Int’l Union of Operating Engineers, AFL-CIO v. Austin Co., 748 F.2d
1262, 1264 (5th Cir. 1986)).
152

Id. (citing John Wiley, 376 U.S. at 557–58).

153

Rec. Doc. 39.

25

the event that the ABS surveyor is unable to resolve the matter, the parties shall submit the matter
in dispute to binding arbitration.” 154 It cannot be “confidently” said that the language of the
contract suggests that the failure to timely appoint an ABS surveyor operates as a bar to arbitration
altogether; thus, the “rare” exception recognized by the Fifth Circuit in Chevron Chemical Co.
does not apply here.155
There is a strong presumption in favor of arbitrability,156 and the party resisting arbitration
bears the burden of proving that a dispute is not arbitrable.157 To overcome the presumption in
favor of arbitrability, there must be clear evidence that the parties did not intend the claim to be
arbitrated.158 Here, Plaintiffs have not met their burden to prove that the instant dispute is not
arbitrable, because they have not presented clear evidence that the parties did not intend their claim
to be arbitrated. Although Plaintiffs have asserted that the hiring of an ABS surveyor within five
days of a dispute acts as a condition precedent to arbitration, a more plausible reading of the plain
language of the contract is that failing resolution of a technical dispute by an ABS surveyor, the
parties are to submit the dispute to binding arbitration. Even if the parties’ conflicting
interpretations of the contract were equally plausible, the dispute must still be submitted to
arbitration, because the Fifth Circuit has instructed that any doubts about the arbitrability of a
dispute should be resolved in favor of arbitration.159

154

Rec. Doc. 33 at 5.

155

815 F.3d at 341.

156

See Waffle House, 534 U.S. at 289.

157

See Am. Heritage Life Ins. Co., 321 F.3d at 539.

158

See Moses H. Cone, 460 U.S. at 24–25.

159

Fleetwood Enters., 280 F.3d at 1073.

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IV. Conclusion
Here, the parties entered into a valid agreement to arbitrate the instant dispute. The Court
concludes that the parties’ agreement falls within the scope of the FAA and that the arbitration
clause in the contract is enforceable under the FAA.
Accordingly,
IT IS HEREBY ORDERED that Defendant VT Halter’s “Motion to Compel
Arbitration”160 is GRANTED.
IT IS FURTHER ORDERED that Plaintiffs’ “Motion to Stay Arbitration” 161 is
DENIED AS MOOT.

20th
NEW ORLEANS, LOUISIANA, this ______ day of October, 2016.

________________________________
NANNETTE JOLIVETTE BROWN
UNITED STATES DISTRICT JUDGE

160

Rec. Doc. 24.

161

Rec. Doc. 67

27