Americon Group, Inc. et al v. Marco Contractors, Inc. et al

Filing 55

OPINION and ORDER Granting in Part and Denying in Part Third-Party Defendant's 44 MOTION to Dismiss the Third Party Complaint and Compel Arbitration. Signed by District Judge Matthew F. Leitman. (Monda, H)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
AMERICON GROUP, INC., et al.
Plaintiffs,
Case No. 14-cv-10785
Hon. Matthew F. Leitman

v.
MARCO CONTRACTORS, INC., et al.
Defendants.
And
MARCO CONTRACTORS, INC.,
Third-Party Plaintiff,
v.
GMRI, INC.
Third-Party Defendant.
_________________________________/

OPINION AND ORDER GRANTING IN PART AND DENYING IN PART
THIRD-PARTY DEFENDANT’S MOTION TO DISMISS THE THIRDPARTY COMPLAINT AND COMPEL ARBITRATION (ECF #44)
GMRI, Inc. (“GMRI”) owns and operates Red Lobster restaurants. In 2013,
GMRI hired Marco Contractors, Inc. (“Marco”) to serve as general contractor on
renovation work to be performed on two Red Lobsters in Michigan. Marco then
entered into subcontracts with Americon Group, Inc. (“Americon”), Garr Electric Co.,
Inc. (“Garr”), and Detroit Spectrum Painters, Inc. (“Spectrum”) to perform some of
the work. In this action, Americon, Garr, and Spectrum (collectively, “Plaintiffs”)

allege that Marco failed to pay amounts owing under their subcontracts. (See the
“Second Amended Complaint,” ECF #30.)

Marco has filed a “Third-Party

Complaint” against GMRI in which Marco alleges that GMRI breached the general
contract. (See the “Third-Party Complaint,” ECF #36.) GMRI has now moved to (1)
dismiss the Third-Party Complaint and (2) compel Marco to arbitrate its dispute with
GMRI in Florida. (See the “Motion,” ECF #44.) For the reasons discussed below, the
Court GRANTS GMRI’s request to dismiss the Third-Party Complaint and DENIES
GMRI’s request to compel arbitration in Florida.
THE PARTIES’ FACTUAL ALLEGATIONS AND
THE PROCEDURAL HISTORY OF THIS ACTION
GMRI, a Florida corporation with its principal place of business in Florida,
owns and operates Red Lobster restaurants throughout the United States. (See Mot. at
1, Pg. ID 786.) On or about June 5, 2013, GMRI entered into agreements with Marco,
a general contractor based in Pennsylvania, to remodel Red Lobster restaurants
located at 101 W. 12 Mile Road, Madison Heights, Michigan and at 5774 N. Wayne
Road, Westland, Michigan (the “Restaurants”). (See the “General Contracts,” ECF
##29-2 and 29-3.)
The General Contracts contained the following arbitration provision:
[GMRI] and [Marco] shall settle by arbitration any
controversy or claim, including any claim of
misrepresentation, arising out of or related to this Contract
or the Contract Documents, or to any agreement or contract
entered into between [GMRI] and [Marco], or any
equipment or service [Marco] furnishes to [GMRI].

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(The “Arbitration Clause,” General Contracts at ¶12.1.)

The General Contracts

further provided that “[t]he arbitration shall be held and the award shall be deemed to
be made in Orlando, Florida unless [GMRI] requests another hearing locale.” (The
“Forum Selection Clause,” id. at ¶12.1.) In addition, GMRI and Marco agreed that
the General Contracts would be “construed, interpreted and enforced in accordance
with the Laws of the State of Florida….” (Id. at ¶9.1.)
One week after executing the General Contracts, Marco entered into
subcontracts with Plaintiffs to perform work on the Restaurants.
“Subcontracts,” ECF ##30-2, 30-3, 30-4, 30-15, and 30-16.)

(See the

The Subcontracts

established a schedule for Marco to make payments to the Plaintiffs. (See id. at ¶5.)
However, each Subcontract provided that
[t]his payment schedule shall be expressly conditioned
upon [Marco] first receiving payments from [GMRI], with
the release to [Plaintiff] of [Plaintiff’s] proportional share
within seven to ten (7-10) working days of receipt of
payment from [GMRI]….
[Plaintiff] expressly
acknowledges, understands and agrees that [Marco] shall
have no obligation whatsoever to pay [Plaintiff] for any
work performed under this Subcontract until and unless
[Marco] has been paid by [GMRI], which payment shall be
a condition precedent to any obligations of [Marco] to pay
for any work hereunder….
(Id.)

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On February 20, 2014, Plaintiffs filed the instant action against Marco.1 In
their Second Amended Complaint, Plaintiffs alleged that Marco breached the
Subcontracts by failing to pay Plaintiffs in full for work they performed on the
Restaurants. (See Sec. Am. Compl.)
Marco then filed the Third-Party Complaint against GMRI.2 Marco alleges that
GMRI breached the General Contracts by refusing to pay Marco for the work it
completed on the Restaurants. (See Third-Party Compl. at ¶¶14-15.) Marco also
brings claims against GMRI for unjust enrichment and injunctive relief. (Id. at 1627.)
GMRI has now moved to dismiss the Third-Party Complaint on the ground that
the claims are subject to mandatory arbitration under the Arbitration Clause. (See
Mot. at ¶8.) In addition, GMRI asks this Court to enter an order compelling Marco to
arbitrate its dispute with GMRI in Florida, under Florida law. (See id.) Marco
opposes GMRI’s requested relief on the grounds that (1) the Arbitration Clause is
unenforceable, and (2) GMRI is a necessary and indispensable party to Plaintiffs’
underlying action against Marco pursuant to Fed. R. Civ. P. 19(b).

(See the

“Response Brief,” ECF #49.)

1

Plaintiffs also named Old Republic Insurance Company as a defendant in the
action.
2

Marco also named Golden Gate Capital Management, Inc. (“GCCM”) as a thirdparty defendant. Marco voluntarily dismissed GCCM from the action on October
17, 2014. (See ECF #43.)

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The Court heard oral argument on GMRI’s Motion on January 27, 2015. For
the reasons discussed below, the Court GRANTS GMRI’s request to dismiss the
Third-Party Complaint and DENIES GMRI’s request to compel arbitration.
ANALYSIS
Under the Federal Arbitration Act (“FAA”), a party’s agreement “to settle by
arbitration a controversy thereafter arising … shall be valid, irrevocable, and
enforceable.” 9 U.S.C. § 2. The threshold question under the FAA is “whether the
dispute is arbitrable, meaning that a valid agreement to arbitrate exists between the
parties and that the specific dispute falls within the substantive scope of the
agreement.” Landis v. Pinnacle Eye Care, LLC, 537 F.3d 559, 561 (6th Cir. 2008).
The FAA “[m]anifest[s] a ‘liberal federal policy favoring arbitration agreements.’”
Javitch v. First Union Securities, Inc., 315 F.3d 619, 624 (6th Cir. 2003) (quoting
Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 625 (1985)).
Accordingly, any doubts regarding the enforceability of an arbitration clause “should
be resolved in favor of arbitration.” Id. (quoting Moses H. Cone Mem’l Hosp. v.
Mercury Constr. Corp., 460 U.S. 1, 25 (1983)).
In this case, the Court has little difficulty concluding that Marco and GMRI
entered into a valid agreement to arbitrate disputes, such as this one, arising out of the
General Contracts. Indeed, Marco unequivocally agreed to “settle by arbitration any
controversy or claim” against GMRI “arising out of or related to” the General
Contracts. Moreover, the instant dispute – relating to GMRI’s alleged failure to pay

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Marco for work it completed on the Restaurants pursuant to the General Contracts –
clearly falls within the ambit of the Arbitration Clause. Having made an enforceable
agreement to arbitrate such disputes, Marco cannot now litigate its claim against
GMRI in federal court. See, e.g., Nestle Waters North Am., Inc. v. Bollman, 505 F.3d
498 (6th Cir. 2007) (affirming dismissal of plaintiff’s claims because disputes fell
within scope of binding arbitration agreement).3
Marco counters that the Arbitration Clause is unenforceable because it is
unconscionable. But Marco has not shown a difference in the parties’ bargaining
power; nor has Marco even attempted to argue that there is anything unreasonable
about having to arbitrate, rather than litigate, its dispute with GMRI.4 Marco is a

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The Court would reach the same conclusion under either Michigan or Florida
law if either legal regime applied here. Indeed, under both Michigan and Florida
law provide, a party’s agreement to arbitrate a controversy is valid and
enforceable. See Fla. Stat. § 682.02(1); M.C.L. § 691.1686(1). Further, both
States construe arbitration agreements liberally in favor of arbitration. See, e.g.,
Kolsky v. Jackson Square, LLC, 28 So.3d 965, 969 (Fla. Ct. App. 2010) (doubts
concerning arbitration clauses should be resolved in favor of arbitration); In re
Nestorovski Estate, 769 N.W.2d 720, 735-36 (Mich. Ct. App. 2009). Where, as
here, the result would be the same under any of the potentially-applicable legal
regimes, the Court need not conduct a choice-of-law analysis. See, e.g., Cinetic
Dyag Corp. v. Forte Automation Sys., Inc., No. 08-11790, 2008 WL 4858005, at
*3 (E.D. Mich. Nov. 6, 2008) (where potentially-applicable laws are “substantially
the same … choice of law analysis is unnecessary”).
4

Moreover, the Court notes that Marco initially attempted to enforce a similar
provision in the Subcontracts in which the Plaintiffs agreed to arbitrate disputes
with Marco in Pennsylvania. (See ECF #17.) Marco apparently found nothing
unconscionable about attempting to enforce that arbitration agreement.

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sophisticated national company5 that could have (1) negotiated with GMRI to remove
the Arbitration Clause from the General Contracts or (2) simply declined to enter into
the General Contracts if GMRI refused to delete the clause.

Under these

circumstances, neither the General Contracts nor the Arbitration Clause are
unconscionable. See Whirlpool Corp. v. Grigoleit Co., 713 F.3d 316, 321 (6th Cir.
2013) (to establish unconscionability, party challenging contract must show both that
it had no meaningful choice when it signed the contract and that the challenged
provision is substantively unreasonable).
Marco next urges the Court not to enforce the Arbitration Clause because the
Forum Selection Clause designates Florida, rather Michigan, as the forum for the
arbitration. This argument misses the mark. The designation of the forum is separate
from the parties’ agreement to arbitrate. Indeed, even if Marco is correct that the
Forum Selection Clause is unenforceable (as explained further below, this Court
expresses no opinion on that matter), that would not free Marco from its obligation to
arbitrate its disputes with GMRI; it would mean only that the agreed-upon arbitration
could occur in a forum other than Florida. Marco has not cited any authority holding
that an agreement to arbitrate is void if accompanied by a forum selection clause that
is not enforceable.

5

GMRI notes that Marco’s website states that Marco has been in business for
“more than 30 years” and that it holds “contractor’s licenses in all 50 states.” (See
Mot. at 1, Pg. ID 786.) Marco has not denied these statements.

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Marco next argues that its Third-Party Complaint should not be dismissed
because GMRI is an indispensable party to this action pursuant to Rule 19(b) of the
Federal Rules of Civil Procedure. In Marco’s view, GMRI’s participation is needed
in order to “properly and fully adjudicate the Plaintiff’s [sic] claims, as they are not
entitled to be paid unless and until GMRI pays Marco.” (Resp. Br. at 3-4, Pg. ID 83839.) Marco’s Rule 19(b) argument is misplaced. “Rule 19 does not provide or
support the introduction of a third-party defendant into a lawsuit. Rather, Rule 19
provides that the court may, under proper circumstances, require the joinder of a nonparty as a plaintiff, defendant or involuntary plaintiff. It does not empower the court
to order joinder of a third-party defendant….” United States ex rel. v. Allstate Ins.
Co., 265 F.R.D. 266, 270 (E.D. La. 2010) (citing Brooks v. Hickman, 101 F.R.D. 16,
18 (W.D. Pa. 1984)).
Moreover, and in any event, Marco applies Rule 19(b) incorrectly. Rule 19(b)
governs “whether a case should proceed in the absence of a particular party.” RamcoGershenson Properties, L.P. v. Hoover Annex Group LLC, 228 F.R.D. 610, 614 (E.D.
Mich. 2005) (emphasis added). In this case, Marco attempts to use Rule 19(b) as a
mechanism for including GMRI in this action. But Rule 19(b) does not serve that
purpose.
Marco’s Third-Party Complaint suffers from another fatal flaw: it is not a
“third-party complaint” at all. Fed. R. Civ. P. 14(a)(1) provides that a defendant may
file a third-party complaint against “a nonparty who is or may be liable to it for all or

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part of the claim against it.” The United States Court of Appeals for the Sixth Circuit
has explained that “[t]hird-party pleading is appropriate only where the third-party
defendant’s liability to the third-party plaintiff is dependent on the outcome of the
main claim….” Am. Zurich Ins. Co. v. Cooper Tire & Rubber Co., 512 F.3d 800, 805
(6th Cir. 2008). See also Watergate Landmark Condo. Unit Owners’ Assoc. v. Wiss,
Janey, Elstner Assoc., 117 F.R.D. 576, 578 (E.D. Va. 1987) (“[i]t is settled beyond
dispute that a third party claim can be maintained only if the liability it asserts is in
some way derivative of the main claim”). Marco has not shown that its claims against
GMRI are necessarily derivative of Plaintiffs’ claims against Marco. Indeed, Marco
has asserted independent claims for relief against GMRI.

Accordingly, Marco’s

Third-Party Complaint against GMRI fails because it does not rely on a secondary or
derivative theory of liability.
For all of these reasons, the Court will grant GMRI’s request to dismiss the
Third-Party Complaint. However, the Court will not grant GMRI’s request for an
order compelling Marco to arbitrate its dispute with GMRI in Florida, under Florida
law. “Where the parties have agreed to arbitrate in a particular forum, only a district
court in that forum has jurisdiction to compel arbitration.” Milan Express Co., Inc. v.
Applied Underwriters Captive Risk Assurance Co., Inc., --- Fed. App’x ---, 2014 WL
5394455, at *5 (6th Cir. Oct. 23, 2014) (citing Inland Bulk Transfer Co. v. Cummins
Engine Co., 332 F.3d 1007, 1018 (6th Cir. 2003)).

This Court therefore lacks

jurisdiction to enter an order compelling arbitration in Florida. If this matter proceeds

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to arbitration, the arbitrator will rule upon the enforceability of the Forum Selection
Clause and will determine which law governs Marco’s claims against GMRI.
CONCLUSION
For all of the reasons stated in this Opinion and Order, IT IS HEREBY
ORDERED that GMRI’s Motion (ECF #44) is GRANTED IN PART and DENIED
IN PART.

Marco’s Third-Party Complaint (ECF #36) is DISMISSED WITH

PREJUDICE.6 GMRI’s request for an order compelling Marco to arbitrate in Florida
and under Florida law is DENIED.

s/Matthew F. Leitman
MATTHEW F. LEITMAN
UNITED STATES DISTRICT JUDGE

Dated: February 4, 2015
I hereby certify that a copy of the foregoing document was served upon the
parties and/or counsel of record on February 4, 2015, by electronic means and/or
ordinary mail.
s/Holly A. Monda
Case Manager
[phone]

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This dismissal operates as a bar to Marco litigating (as opposed to arbitrating) its
claims against GMRI. It is not an adjudication on the merits of Marco’s claims
against GMRI. The Court expresses no opinion on the merits of those claims and
does not intend to preclude Marco from asserting those claims in arbitration.

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