Arabian Motors Group W.L.L. v. Ford Motor Company

Filing 64

OPINION AND ORDER (1) Denying #55 Defendants' Motion to Stay Proceedings (ECF No. 55), (2) Dismissing Plaintiff's Claims in Part Based on Mootness, and (3) Dismissing Plaintiff's Remaining, Non-Moot Claims Without Prejudice. Signed by District Judge Matthew F. Leitman. (MacKay, K)

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UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
ARABIAN MOTORS GROUP W.L.L.,
Plaintiff,

Case No. 16-cv-13655
Hon. Matthew F. Leitman

v.
FORD MOTOR COMPANY,
Defendant.
_________________________________/
OPINION AND ORDER (1) DENYING DEFENDANT’S MOTION TO
STAY PROCEEDINGS (ECF No. 55), (2) DISMISSING PLAINTIFF’S
CLAIMS IN PART BASED ON MOOTNESS, AND (3) DISMISSING
PLAINTIFF’S REMAINING, NON-MOOT CLAIMS
WITHOUT PREJUDICE

In this action, Plaintiff Arabian Motors Group W.L.L. asserts fraud and breach
of contract claims against Defendant Ford Motor Company. (See Compl., ECF No.
1.) Ford insists that these claims are subject to mandatory arbitration under a
provision of the parties’ contract, and it has moved to stay these proceedings so that
Arabian Motors’ claims may be adjudicated by an arbitrator. (See Mot. to Stay, ECF
No. 55.) The Court agrees with Ford that Arabian Motors must present its claims to
an arbitrator. But the Court believes that dismissal, rather than a stay, is the best
course of action.
Ford counters that under Section 3 of the Federal Arbitration Act (the “FAA”),
9 U.S.C. § 3, this Court lacks the discretion to dismiss. Section 3 provides that “on
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application of one of the parties,” a district court “shall stay the trial of the action”
if the action involves “any issue” that is “referable to arbitration.” Ford says that
since Arabian Motors’ claims are subject to arbitration and since it (Ford) has applied
for a stay, Section 3 compels the Court to stay, rather than dismiss, this action.
The stay versus dismissal issue presented here has sharply divided the federal
courts. Several circuits have concluded that a district court does have discretion to
dismiss an action after concluding that all claims are subject to arbitration. Several
others have adopted Ford’s position that Section 3 of the FAA compels a district
court, upon application of a party, to stay, rather than dismiss, an action even if all
of the claims are subject to arbitration.
The Sixth Circuit has not yet definitively resolved the stay versus dismissal
issue in a published decision. But it has strongly suggested in published decisions,
and has squarely held in several unpublished decisions, that a district court may
dismiss an action if it concludes that all claims are subject to arbitration. The Sixth
Circuit has also opined (in addressing a related issue) that allowing district courts to
dismiss actions in which all claims are subject to arbitration does not undermine the
pro-arbitration policies of the FAA. The clear majority of district courts in this
Circuit have likewise concluded that a district court may dismiss an action in which
all of the claims are subject to arbitration. Several of those courts have rejected
Ford’s argument that Section 3 of the FAA requires a stay (if applied for) where all

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claims are subject to arbitration. And with good reason. A careful reading of Section
3 reveals that it does not apply to cases in which all claims are subject to arbitration.
For the reasons explained in detail below, this Court concludes that it may
dismiss, rather than stay, an action in which all claims must be presented to an
arbitrator. And the Court further concludes that dismissal, rather than a stay, makes
the most sense here where all of Arabian Motors’ remaining, non-moot claims are
subject to mandatory arbitration. The Court therefore exercises its discretion to
DENY Ford’s motion to stay (ECF No. 55) and to sua sponte DISMISS Arabian
Motors’ remaining, non-moot claims without prejudice.
I
A
Arabian Motors is a corporation organized under the laws of Kuwait. (See
ECF No. 5-1, PageID.225.) Ford is an automobile manufacturer headquartered in
Dearborn, Michigan. (See id.) On May 2, 2005, Arabian Motors and Ford entered
into an agreement under which Ford sold vehicles to Arabian Motors for resale to
customers in the Middle East (the “Resale Agreement”). (See id.)
In the Resale Agreement, Arabian Motors and Ford agreed to arbitrate any
“dispute, claim or controversy … in connection with the breach, implementation,
invalidity, or termination” of the Resale Agreement that the parties could not resolve
through informal negotiations. (Resale Agmt. at ¶14, ECF No. 5-1, PageID.245-

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246.) Specifically, the parties agreed that any unresolved disputes would be subject
to “binding arbitration in accordance with the United Nations Commission on Trade
Law [“UNCITRAL”] Arbitration Rules in effect on the date” the Resale Agreement
was executed. (Id. at ¶14(b), PageID.245.) Those rules provided, among other
things, that “the arbitral tribunal shall have the power to rule on objections that it has
no jurisdiction, including any objection with respect to the existence or validity of
the arbitration clause or of the separate arbitration agreement.” 1976 UNCITRAL
Arbitration Rules, Rule 21.
B
The relationship between Arabian Motors and Ford apparently began to
deteriorate in 2014. Two years later, on March 14, 2016, Ford sent written notice to
Arabian Motors terminating the Resale Agreement effective July 27, 2016 (the
“Notice of Termination”). (See Notice of Termination, ECF No. 5-2, PageID.295297.)
On March 31, 2016, Ford submitted a Notice of Arbitration and Statement of
Claim (the “Arbitration Demand”) to the American Arbitration Association (the
“AAA”). (See Arbitration Demand, ECF No. 5-2, PageID.253-267.) The Arbitration
Demand sought a “declaratory judgment that Ford properly terminated the [Resale
Agreement] for any and/or all reasons stated in the [Notice of Termination] and is
not liable to [Arabian Motors] for terminating the [Resale Agreement] or relating to

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the course of dealings between Ford and [Arabian Motors].” (Id., PageID.266.) The
AAA assigned the matter to arbitrator Lawrence S. Schaner (the “Arbitrator”).
In email messages sent to the AAA on April 30, 2016, May 24, 2016, and
September 6, 2016, Arabian Motors objected to the arbitration on the grounds that
(1) the dispute was not arbitrable and (2) the AAA lacked jurisdiction to decide
whether Arabian Motors could be compelled to arbitrate. (See emails, ECF No. 134, PageID.494; ECF No. 5-3, PageID.299; ECF No. 13-6, PageID.503-504.)
C
On October 13, 2016, Arabian Motors filed a five-count Complaint in this
Court against Ford. (See Compl., ECF No. 1.) In the Complaint, Arabian Motors
brings the following claims:


In Count I of the Complaint, Arabian Motors seeks “an order enjoining
the arbitration filed by Ford.”1 (Id. at ¶110, PageID.28.)



In Count II of the Complaint, Arabian Motors seeks a “declaratory
judgment pursuant to 28 U.S.C. § 2201[] that it has no obligation to

1

As described in further detail above, the arbitration filed by Ford is complete, the
Arbitrator entered a Final Award in favor of Ford, and both this Court and the Sixth
Circuit have confirmed that award. Thus, the Court DISMISSES this claim as moot.
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arbitrate [Ford’s claims] or the claims [Arabian Motors] makes in [its]
Complaint.”2 (Id. at ¶113, PageID.28.)


In Count III of the Complaint, Arabian Motors seeks damages for
Ford’s alleged breach of contract. (See id. at ¶¶ 114-148, PageID.2837.)



In Count IV of the Complaint, Arabian Motors seeks damages for
Ford’s alleged silent fraud. (See id. at ¶¶ 149-162, PageID.37-41);



In Count V of the Complaint, Arabian Motors seeks damages for Ford’s
alleged fraudulent misrepresentations. (See id. at ¶¶ 163-175,
PageID.41-43.)

On October 17, 2016, Arabian Motors filed a motion for preliminary
injunction to stay the arbitration proceedings that Ford had commenced. (See Mot.
for Prelim. Inj., ECF No. 5.) Notably, Arabian Motors did not contend that the
claims Ford asserted in the arbitration fell outside of the mandatory arbitration
provision in the Resale Agreement. Instead, Arabian Motors argued that a federal
statute, the Motor Vehicle Franchise Contract Arbitration Fairness Act (the
“Fairness Act” or the “Act”), 15 U.S.C. § 1226, prohibited enforcement of the

2

As explained in text above, and in footnote one above, the arbitration filed by Ford
is complete and both this Court and the Sixth Circuit have confirmed the Arbitrator’s
Final Award in favor of Ford on Ford’s claims. Therefore, the Court DISMISSES
this claim as moot to the extent that it seeks a declaration that Arabian Motors should
not be compelled to arbitrate Ford’s claims.
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arbitration provision. The Fairness Act provides that “whenever a motor vehicle
franchise contract provides for the use of arbitration to resolve a controversy arising
out of or relating to such contract, arbitration may be used to settle such controversy
only if after such controversy arises all parties to such controversy consent in writing
to use arbitration to settle such controversy.” 15 U.S.C § 1226(a)(2) (emphasis
added). Arabian Motors contended that the Act precluded enforcement of the
arbitration provision because (1) the Act requires the post-dispute consent of all
parties to submit any issue (including arbitrability) to an arbitrator but (2) the
arbitration provision in the Resale Agreement purports to assign the issue of
arbitrability to the Arbitrator even though Arabian Motors had not given its postdispute consent to such an assignment. (See Mot. for Prelim. Inj., ECF No. 5,
PageID.209-220.) In response, Ford argued that the Fairness Act applies only to
domestic automobile dealers and does not apply to foreign dealers like Arabian
Motors. (See Ford Resp. to Mot. for Prelim. Inj., ECF No. 13.)
The Court agreed with Ford and declined to grant Arabian Motors a
preliminary injunction. The Court ruled that the Fairness Act does not apply to the
Resale Agreement and that the Act therefore did not preclude enforcement of the
agreement’s mandatory arbitration provision. (See Op. and Order, ECF No. 18.)
And because that provision was enforceable, the Court held that Arabian Motors
needed to present its objections to arbitration to the Arbitrator. (See id.)

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D
Arabian Motors then raised its objections to arbitration with the Arbitrator. It
argued to the Arbitrator that under the Fairness Act, it could not be compelled to
arbitrate the claims asserted by Ford because it had not given advance written
consent. But Arabian Motors still did not argue that Ford’s claims fell outside the
scope of the mandatory arbitration provision in the Resale Agreement. (See
Arbitrator’s Interim Award, ECF No. 28-5, PageID.898.) Ford again argued that the
Fairness Act did not apply to the Resale Agreement because Arabian Motors is a
foreign automobile dealer.
The Arbitrator agreed with Ford. (See id.) He ruled that the Fairness Act
applies only to domestic automobile dealers and that, accordingly, it posed no
obstacle to the arbitration proceedings commenced by Ford. (See id.) He then
proceeded to determine whether Ford’s claims fell within the scope of the arbitration
provision of the Resale Agreement. He easily concluded that they did – a conclusion
that Arabian Motors did not resist. (See id.)
Following the Arbitrator’s interim ruling, Arabian Motors filed an Answer
and a four-count Counterclaim in the arbitration. (See Arbitrator’s Final Award, ECF
No. 32-2, PageID.976-977, describing the procedural history of the arbitration.) In
its Counterclaim, Arabian Motors sought, among other things, damages for alleged
fraud and wrongful termination of the Resale Agreement. (See id.) Arabian Motors

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later withdrew its Counterclaim from the arbitration proceedings. (See id.,
PageID.978.)
The Arbitrator thereafter resolved the arbitration by granting a motion for
summary disposition filed by Ford. (See id., PageID.983-1001.) He memorialized
his decision in a Final Award in which he ruled that: (1) the Resale Agreement was
terminable at will, and Ford properly exercised its right to terminate at will; (2) Ford
properly terminated the Resale Agreement for cause under Paragraph 13(b)(1); and
(3) Ford properly terminated the Resale Agreement for cause under Paragraph
13(b)(4). (See id., PageID.984-997.) The Arbitrator also ordered Arabian Motors to
pay Ford more than $1.25 million in legal fees and other costs. (See id.,
PageID.1000.)
E
After the Arbitrator issued the Final Award, Arabian Motors returned to this
Court and filed a motion to vacate the award. (See Mot. to Vacate, ECF No. 32.)
Arabian Motors renewed its argument that under the Fairness Act, it should not have
been compelled to arbitrate because it had not given advance written consent. (See
id.) (But Arabian Motors again did not argue that Ford’s claims fell outside of the
Resale Agreement’s arbitration provision.) Ford filed a combined response in
opposition to Arabian Motors’ motion and cross-motion to confirm the Final Award.
(See Ford Resp. to Mot. to Vacate, ECF No. 35.) Ford argued that the Arbitrator (1)

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properly concluded that the Fairness Act did not apply to the Resale Agreement and
(2) did not make any error that would warrant vacating the Final Award. (See id.)
The Court entered an order denying Arabian Motors’ motion and granting
Ford’s motion. (See Order, ECF No. 37.) In that order, the Court instructed the
parties to confer and attempt to agree upon the form of a judgment confirming the
Final Award. (See id.) They did so and reached an agreement. On June 6, 2018, the
Court entered the judgment confirming the Final Award. (See Judgment, ECF No.
39.)

That judgment did not specifically refer to Arabian Motors’ claims against

Ford that it had raised in this action, and the Court had not directly ruled upon the
viability of those claims at the time it entered the judgment.
F
Arabian Motors thereafter filed an appeal from the judgment in the United
States Court of Appeals for the Sixth Circuit. (See Notice of Appeal, ECF No. 40.)
Heading into that appeal, Arabian Motors believed that this Court’s rulings, taken
together, effectively prevented Arabian Motors from pursuing its claims in this
forum. More specifically, Arabian Motors believed that order denying its motion
for preliminary injunction – in which the Court held that the Fairness Act did not bar
enforcement of the arbitration provision in the Resale Agreement – had been
“incorporated” into the Court’s judgment. (Arabian Motors Reply Br., Arabian
Motors Group W.L.L. v. Ford Motor Company, Sixth Circuit Case No. 18-1748, Dkt.

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28, Pages 12-13.) And based upon that belief, Arabian Motors concluded that the
judgment compelled to it arbitrate its claims against Ford. (See id.) In an attempt to
revive its ability to assert those claims in this forum, Arabian Motors argued to the
Sixth Circuit that this Court had misconstrued and misapplied the Fairness Act. (See
Arabian Motors Appellant Br., Arabian Motors Group W.L.L. v. Ford Motor
Company, Sixth Circuit Case No. 18-1748, Dkt. 20, Pages 28-45.) In addition,
Arabian Motors attacked this Court decision confirming the arbitrator’s Final
Award. (See id., Pages 46-59.)
The Sixth Circuit first held that it lacked jurisdiction over Arabian Motors’
challenge to this Court’s ruling that the Fairness Act did not bar enforcement of the
arbitration provision in the Resale Agreement. As described above, this Court
reached that conclusion in its order denying Arabian Motors’ motion for preliminary
injunction. (See Op. and Order, ECF No. 18.) And the Sixth Circuit concluded that
that order was not subject to appeal because it was an interlocutory order. See
Arabian Motors Group W.L.L. v. Ford Motor Company, 775 F. App’x 216, 217 n.1
(6th Cir. 2019).
The Sixth Circuit then turned to the portion of Arabian Motors’ appeal
challenging this Court’s decision to confirm the Final Award. The court affirmed
that decision. It rejected Arabian Motors’ argument that the Arbitrator had shown a

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manifest disregard for the law when he concluded that the Fairness Act did not apply
to the Resale Agreement. See id. at 219-20.
G
Following the Sixth Circuit’s ruling, the case returned to this Court for further
proceedings. The Court then convened a status conference on October 16, 2019, to
discuss next steps. During that conference, counsel for Arabian Motors reiterated
his belief that the Court’s prior ruling concerning the Fairness Act effectively barred
Arabian Motors from pursuing its claims in this forum. And he told the Court that
Arabian Motors wished to appeal that ruling. He indicated that Arabian Motors
wanted the Court to enter a final judgment memorializing the Court’s ruling so that
Arabian Motors could challenge the ruling in the Sixth Circuit and, if successful,
litigate its claims here. Counsel for Ford responded that it was not clear whether
Arabian Motors wished to have the Court dismiss its (Arabian Motors’) claims with
or without prejudice, and Ford’s counsel suggested that, upon a clarification from
Arabian Motors, Ford may not object to dismissal. After some additional discussion
with counsel, the Court instructed the parties to attempt to work together to see if
they could agree upon a path forward for wrapping up the proceedings.
The parties were not able to agree upon a plan for completing the litigation.
So Arabian Motors filed a motion for entry of a final judgment and submitted a
proposed judgment dismissing its claims. (See Mot. for Entry of Judgment, ECF No.

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46; Arabian Motors Proposed Judgment, ECF No. 50.) Arabian Motors explained
that it sought entry of judgment dismissing its own claims based on its belief that
this Court had already concluded (in the Court’s opinion and order denying Arabian
Motors’ motion for a preliminary injunction) that Arabian Motors could not pursue
its claims in this forum. (See Mot. For Entry of Judgment, ECF No. 46,
PageID.1155-1157.) Arabian Motors further said that it sought dismissal to secure
a ruling from the Sixth Circuit that would allow it to assert its claims against Ford in
this Court. (See id.) Ford objected to the judgment proposed by Arabian Motors and
proposed its own judgment. (See Ford Resp. to Mot. for Entry of Judgment, ECF
No. 47; Ford Proposed Judgment, ECF No. 51.) The Court declined to enter either
proposed judgment. It decided that the best course of action was to put the “ball” in
Ford’s “court.” (See 4/20/2020 Hr’g Tr., ECF No. 54, see also infra at n. 3.) The
Court told Ford that because Arabian Motors’ claims were still pending in this
action, Ford had two options: it could file a motion raising its contention that Arabian
Motors’ claims are subject to mandatory arbitration (or attacking the claims on some
other legal basis) or it could file an Answer and litigate the claims in this Court.3
(See 4/20/2020 Hr’g Tr., ECF No. 54.)

3

The Court believed that putting the onus on Ford to (1) assert that Arabian Motors’
claims were subject to mandatory arbitration and/or (2) litigate the claims in this
Court, best reflected the true positions of the parties. It has always been Ford’s
position that all of Arabian Motors’ claims are subject to arbitration, and it has
always been Arabian Motors’ position that under the Fairness Act, it cannot be
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In response, Ford filed a Motion to Dismiss for Lack of Subject Matter
Jurisdiction, or, in the Alternative, to Stay Action Pursuant to 9 U.S.C. § 3. (See Mot.
to Dismiss, ECF No. 55.) Ford first argued that this action was moot because it was
“clear from the record in this case” that Arabian Motors did “not intend to pursue”
its remaining claims to judgment. (Id., PageID.1212.) The “record” to which Ford
referred included Arabian Motors’ motion for entry of judgment (see Mot. for Entry
of Judgment, ECF No. 46). Second, Ford contended that if the Court did not dismiss
for lack of subject matter jurisdiction, it was required to stay the action under Section
3 of the FAA because all of the claims were subject to arbitration and because it
(Ford) had applied for a stay. (See Mot. to Dismiss, ECF No. 55, PageID.1214.)

compelled to arbitrate any of its claims. Given these respective positions, it made
the most sense to have Ford seek dismissal on the basis of the mandatory arbitration
provision because it was Ford, not Arabian Motors, that actually believed that that
provision was enforceable against Arabian Motors. Any motion by Arabian Motors
for entry of judgment dismissing its own claims would only have been to secure
appellate review of this Court’s earlier ruling on the applicability of the Fairness Act
and would not have been based upon a belief by Arabian Motors that Ford was
actually entitled to judgment. To best align the procedural posture of the case with
the actual positions of the parties, the Court directed that if any step toward dismissal
and/or entry of final judgment against Arabian Motors was to be made, it would have
to come from Ford. (See 4/20/2020 Hr’g Tr., ECF No. 54, PageID.1189-1193, 11961200.) Ford has suggested that the Court violated the principle of “party
presentation” by directing that the proceedings move forward in this manner. (See
Ford Supp. Br., ECF No. 62.) For the reasons explained in this footnote and on the
record (see 8/18/20 Status Conf. Tr., ECF No. 61, PageID.1350-1352), the Court
respectfully disagrees.
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Arabian Motors opposed Ford’s motion. (See Arabian Motors Resp., ECF No.
57.) Arabian Motors rejected Ford’s contention that it had no intention of litigating
its remaining claims:
Despite Ford’s contorted self-impressions of AMG’s
intentions, it has always been and continues to be AMG’s
goal to fully litigate the substantive claims of its
Complaint (Claims III- V) before this Court. For Ford to
suggest otherwise makes no sense at any level. Is Ford
suggesting that AMG initiated its action merely to explore
the exercise of pursuing the injunctive and declaratory
relief sought in Counts I and II of its Complaint out of
academic curiosity? Contrary to Ford’s argument, AMG’s
motion practice relating to the entry of a final Judgment is
intended to clarify this Court’s prior Judgment and closure
of this case, so it may proceed. AMG fully intends to try
its claims before this Court, and has fought for 3 ½ years
to achieve its goal.
(Id., PageID.1309-1310.) Arabian Motors also argued that the Court should not stay
the action. (Id., PageID.1310-1311.)
On August 18, 2020, the Court held a status conference to discuss Ford’s
pending motion to dismiss. During that conference, the Court orally denied Ford’s
motion to the extent that it sought dismissal based upon the asserted mootness of this
action. (See 8/18/20 Status Conf. Tr., ECF No. 61, PageID.1350-1351.4) The Court
was satisfied that a full and fair review of the record made clear that Arabian Motors
continued to pursue its claims. (See id.) The Court then asked the parties to submit

4

The Court subsequently entered a written order memorializing this ruling. (See
Order, ECF No. 60.) 
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supplemental briefs on the issues of whether (1) this Court had the authority to
dismiss, rather than stay, this action and (2) if this Court decided to dismiss the
action, should the dismissal be with or without prejudice. (See id., PageID.1363.)
In Ford’s supplemental brief, it argued that Section 3 of the FAA required the
Court to stay, and barred the Court from dismissing, this action. (See Ford Supp. Br.,
ECF No. 62.) Ford further argued that in the event that the Court did decide to
dismiss, the dismissal should be with prejudice. (See id.) Arabian Motors countered
in its supplemental brief that the Court has the discretion to dismiss the action and
that any dismissal should be without prejudice. (See Arabian Motors Supp. Br., ECF
No. 63.)
II
It is well established that this Court “has the power to dismiss a complaint sua
sponte pursuant to Rule 12(b)(6), provided that the plaintiffs have been given
adequate notice and an opportunity to amend.” O’Lear v. Miller, 222 F.Supp.2d 862,
863 (E.D. Mich. 2002). It is equally well established that a complaint fails to state
a claim – and is thus subject to dismiss under Rule 12(b)(6) – where all of the claims
are subject to mandatory arbitration. See Teamsters Local Union 480 v. United
Parcel Serv., Inc., 748 F.3d 281, 286 (6th Cir. 2014) (explaining that a party’s
“failure to pursue arbitration” in spite of a compulsory arbitration provision means
that the party “has failed to state a claim.”). From these rules, it would seem to

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follow that this Court has the authority to sua sponte dismiss a complaint asserting
claims that are all subject to mandatory arbitration – and that the Court has that
power even if the party invoking arbitration requests a stay rather than dismissal. See
Sparling v. Hoffman Const. Co., Inc., 864 F.2d 635, 637-38 (9th Cir. 1988) (holding
that district court may exercise its general power of sua sponte dismissal when faced
with a complaint that asserts only claims that are subject to mandatory arbitration
and where the party requesting arbitration seeks only a stay).
Ford contends, however, that Section 3 of the FAA creates an exception to the
general rule that the Court may sua sponte dismiss a complaint that fails to state a
claim on which relief can be granted. Ford says that Section 3 requires courts to
stay, rather than dismiss, complaints in which all claims are subject to arbitration.
Ford’s position is contrary to the great weight of authority in this Circuit and to the
plain language of Section 3.
A
While the Sixth Circuit has not definitively taken sides in the circuit split over
the stay versus dismissal issue,5 the clear weight of authority in this Circuit holds

5

The circuit split is fully described in two decisions: Aqua-Chem, Inc. v. Barivien,
S.A., 2018 WL 4870603, at ** 3-4 (E.D. Tenn. Mar. 16, 2018) and W & T Travel
Serv., LLC v. Priority One Serv., Inc., 69 F.Supp.3d 158, 172-174 (D.D.C. 2014).
Two of the leading decisions holding that Section 3 of the FAA requires a district
court to stay, rather than dismiss, an action are Lloyd v. HOVENSA, 369 F.3d 263,
270 (3d Cir. 2004) and Katz v. Cellco, 794 F.3d 341, 345-46 (2d Cir. 2015). Two of
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that a district court may dismiss, rather than stay, a civil action in which all of the
claims must be presented to an arbitrator.

First, several published Sixth Circuit

decisions suggest that dismissal, rather than a stay, is appropriate where all claims
are subject to arbitration. For instance, in Green v. Ameritech Corp., 200 F.3d 967,
973 (6th Cir. 2000), the Sixth Circuit quoted with approval the Fifth Circuit’s
holding that “[t]he clear weight of authority supports dismissal of the case when all
of the issues raised in district court must be submitted to arbitration.” Id. (quoting
Alford v. Dean Witter Reynolds, Inc., 975 F.2d 1161, 1164 (5th Cir. 1992)).
Likewise, in Arnold v. Arnold Corp., 920 F.2d 1269, 1276 (6th Cir. 1990) and Stout
v. Byrider, 228 F.3d 709, 714 (6th Cir. 2000), the Sixth Circuit affirmed decisions
by district courts dismissing actions in which all claims were subject to arbitration.
Second, the “majority” of unpublished Sixth Circuit decisions addressing the
stay versus dismissal issue hold that a district court may dismiss an action in which
all of the claims are subject to arbitration. Aqua-Chem, Inc. v. Barivien, S.A., 2018
WL 4870603, at *3 (E.D. Tenn. Mar. 16, 2018). For instance, in Ozormoor v. TMobile, USA, Inc., 354 F. App’x 972 (6th Cir. 2009), the Sixth Circuit held that
district courts are not “require[d] … to stay suits pending arbitration rather than

the leading decisions holding that a district court may dismiss an action in which all
claims are subject to arbitration are Alford v. Dean Witter Reynolds, 975 F.2d 1161,
1164 (5th Cir. 1992) and Sparling, 864 F.2d at 638.
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dismiss them.” Id. at 975. The court stressed that it had “already rejected [the]
argument” that a district court must stay, rather than dismiss, an action in which all
claims are subject to arbitration. Id. (citing Arnold, supra). Likewise, in Andrews v.
TD Ameritrade, Inc., 596 F. App’x 366, 372 (6th Cir. 2014), the plaintiff argued that
the district court erred when it dismissed, rather than stayed, an action in which all
of the claims were subject to arbitration, but the court rejected that argument because
“the law is to the contrary.” Id. And in Hensel v. Cargill, Inc., 198 F.3d 245 (Table),
1999 WL 993775 (6th Cir. 1999), the court held that dismissal, as opposed to a stay,
is proper “where all claims are referred to arbitration.” Id. at *4.6

6

Ford contends that the Sixth Circuit’s unpublished decision in Hilton v. Midland
Funding, LLC, 687 F. App’x 515 (6th Cir. 2017), stands for the proposition that,
upon the request of a party, a district court must stay an action even if all of the
claims are subject to arbitration. (See Ford Supp. Br., ECF No. 62, PageID.1379.)
The Court disagrees. In Hilton, no party requested a stay. See Hilton, 687 F. App’x
at 518. And the court stressed that a request for a stay is a condition precedent to
the applicability of Section 3 of the FAA. See id. Since neither party requested a
stay, the court was not called upon to make, and did not make, any holding as to
whether, in the face of a request, a district court retains discretion to dismiss an action
in which all claims are subject to arbitration. Like several other district courts in this
Circuit, the Court concludes that Hilton “did not reach (and thus did not alter) the
longstanding principle, espoused in Hensel, Ozormoor, and numerous other Sixth
Circuit decisions, that a case ‘in which all claims are referred to arbitration may be
dismissed.’” Kelch v. Pyramid Hotel Group, 2020 WL 489237, at *3 n.5 (S.D. Ohio
Jan. 30, 2020) (quoting Hensel, 1999 WL 993775, at *4). See also Great Am. Ins.
Co. v. Johnson Controls, Inc., 2020 WL 4569126, at *9 (S.D. Ohio Aug. 7, 2020)
(holding that Hilton does not compel a stay where all claims are subject to
arbitration); Robinson v. Credit One Bank, N.A., 2020 WL 3270690, at *2 (S.D. Ohio
June 17, 2020) (same).
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Finally, “the overwhelming majority of district courts throughout the [Sixth]
Circuit have dismissed,” rather than stayed, actions in which all claims are subject
to arbitration. Aqua-Chem, 2018 WL 4870603, at *3 and n.5 (collecting cases).
Indeed, “[m]ost district courts in this circuit agree that the best procedure for
enforcing arbitration agreements is to dismiss the court action without prejudice.”
Debro v. French, 2017 WL 927622, at *4 (E.D. Mich. Feb. 16, 2017) (report and
recommendation), adopted at 2017 WL 914216 (E.D. Mich. Mar 8, 2017).
Absent some persuasive reason, this Court would not be inclined to depart
from this clear weight of in-Circuit authority – especially the Sixth Circuit decisions
– holding that dismissal, rather than a stay, is appropriate where all claims must be
submitted to an arbitrator.
B
1
Ford says that the majority rule in this Circuit runs directly counter to the plain
language of – and thus violates – Section 3 of the FAA. But a careful review of
Section 3 reveals that it “is inapplicable” where, as here, “all claims are subject to
arbitration.” Aqua-Chem, 2018 WL 4870603, at *5.
Section 3 provides:
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 the issue involved in
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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.
9 U.S.C. § 3 (emphasis added).
Section 3’s reference to staying “the trial of the action” until the “issue
referable to arbitration” has been resolved by the arbitrator clearly signals that the
Section deals with a single type of action: one in which less than all of the claims
are subject to arbitration and in which, absent a stay, the remaining claims would
proceed to “trial.” As the district court in Aqua Chem persuasively explained:
Section 3’s language mandates courts stay “the trial of the
action.” 9 U.S.C. § 3 (emphasis added). However, if there are no
triable issues before a court, how must it stay a trial? See Bales
& Goff, Dismiss or Stay, at 554. When presented with a claim
that is within the scope of a valid and binding arbitration
agreement, there is nothing for a court to try; the claim must be
arbitrated in accordance with the agreement’s directions.
Therefore, § 3’s command, requiring courts to stay “the trial of
the action,” cannot be read to apply in cases where there are no
triable issues, such as when every claim presented by parties is
arbitral. If all claims are subject to arbitration, § 3’s mandate is
inapplicable because there will be no trial.
A contrary reading, holding § 3 applies when there are no triable
issues, dishonors the statute’s text. Doing so omits the very
object of § 3’s one-hundred-word sentence. If that object, “the
trial of the action,” is ignored and the statute is read without it, it
renders the sentence incomplete and leaves the reader with only
questions, not direction. 9 U.S.C. § 3. The court “shall ... stay”
what? What is the verb “stay” acting on? The answer to those
questions is unambiguous; it is “the trial of the action.” The
answer is not merely “[...] the action,” as the Court seemed to
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believe. Id. (emphasis added). Nor does the statute “instruct[ ]”
courts to “stay proceedings.” Hilton, 687 F. App’x at 518
(emphasis added). That is not what the statute’s text says. Nor
does the statute direct that a court “‘shall’ enter a stay ...,” which
inserts language and converts the verb “stay” into the object of
the sentence. Lloyd, 369 F.3d at 269 (emphasis added). As such,
the broad reading is contrary to § 3’s plain language. It ignores
necessary portions of the text at best, and at worst it implies or
reads-in words in a way that changes the meaning and structure
of the sentence. Accordingly, the Court finds such a broad
interpretation of § 3 to be incorrect. The Court cannot abandon
or contort § 3’s plain language. To do otherwise would be
contrary to established rules of statutory construction.
Aqua-Chem, 2018 WL 4870603, at *5 (emphasis in original).
The court in Aqua Chem rightly attached great significance to Congress’
command in Section 3 to stay only “the trial of the action” and correctly concluded
that a “stay of the trial” is not the same as a “stay of proceedings.” Indeed, Congress
distinguished between the two types of stays in the FAA itself. See 9 U.S.C. §12
(referring to “an order to stay the proceedings in an action.”) (Emphasis added).
Had Congress intended Section 3 to apply when no claims remain for trial – i.e.,
when all claims are subject to arbitration – it surely would have referred in Section
3 to a “stay of proceedings,” just as it did in Section 9. As the court in Aqua Chem
cogently explained, Congress’ direction in Section 3 to stay “the trial of the action”
makes sense only in the context of an action in which at least one non-arbitrable
claim remains for trial. See also Richard A. Bales & Melanie A. Goff, An Analysis
of an Order to Compel Arbitration: To Dismiss or Stay, 115 Penn St. L. Rev. 539,

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553-55 (Winter 2011) (arguing that the “trial of the action” language in Section 3
makes clear that the Section does not require a stay where all claims are subject to
arbitration and no claims remain for trial).
The Sixth Circuit has confirmed this reading of Section 3. It has stressed that
Section 3 applies where “any separate claim is referable to arbitration;” in that event,
“a stay of proceedings on the remaining claims is mandatory.” Hensel, 1999 WL
993775, at *4 (emphasis added). Justice Stephen Breyer, who appears to be the only
member of the Supreme Court to address the stay versus dismissal issue, has likewise
adopted this reading of Section 3. In a dissenting opinion touted by Ford as
containing an “extensive” analysis of Section 3 (Ford Supp. Br, ECF No. 62 at
PageID.1378), Justice Breyer explained that Section 3 applies “[w]here a suit
contains several claims, and the district court has determined that the parties agreed
to arbitrate only a subset of those claims.” Lamps Plus, Inc. v. Varela, __ U.S. __,
139 S.Ct. 1407, 1423 (2019) (Breyer, J., dissenting).7 In Justice Breyer’s words, the
stay provided for in Section 3 “relieves the parties of the burden and distraction of
continuing to litigate any remaining claims [– i.e., any claims not subject to

7

The majority in Lamps Plus did not disagree with Justice Breyer’s reading of
Section 3. It did not reach the point.
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arbitration –] while the arbitration is ongoing.” Id.8 Section 3 simply does not apply
where, as here, there are no claims “remaining” in the district court for trial.
Ford’s contrary reading of Section 3 focuses on the wrong language in the
statute. Ford focuses narrowly on the term “shall.” Ford insists that because Section
3 “provides that the Court ‘shall’ implement a stay,” it leaves a district court “no
discretion to dismiss a case” in which all of the claims are referable to arbitration.
(Ford Supp. Br., ECF No. 62 at PageID.1374-1378.) But Ford’s tight focus on the
word “shall” ends up begging the key question. There is no dispute that Section 3 –
by using the term “shall” – commands a district court to enter a stay. The question
is: when must a district court enter a stay? And that question cannot be answered by
reference to the term “shall,” standing alone. On the contrary, to answer that
question, the Court must read the term “shall” in the context of Section 3 as a whole.
And that Section does not merely provide that a court, in Ford’s words, “shall
implement a stay.” Instead, as set forth above, it provides that a court “shall stay the
trial of the action.” And for all of the reasons explained above (and confirmed by

8

It is true, as Ford notes, that Justice Breyer concluded that the district court in
Lamps Plus should not have dismissed that action after compelling arbitration. See
Lamps Plus, 139 S.Ct. at 1424-26 (Breyer, J., dissenting). But Justice Breyer’s
reasoning was not based upon the reading of Section 3 that Ford advances. Instead,
Justice Breyer concluded that dismissal was inconsistent with the structure of, and
policy underlying, the FAA because a dismissal allows for an immediate appeal. See
id. As explained in detail below in Section (II)(B)(3), the Sixth Circuit does not
appear to share Justice Breyer’s view that allowing an immediate appeal from a
dismissal order would undermine the FAA’s structure and/or policy goals.
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Justice Breyer and the Sixth Circuit), that phrase only makes sense when applied to
an action in which some claims are subject to arbitration and some are not.
2
Ford alternatively contends that, at a minimum, a district court must stay,
rather than dismiss, an action where the party invoking arbitration seeks only a stay
and does not request dismissal. (See Ford’s Supp. Br., ECF No. 62 at PageID.1379.)
Ford rests this argument upon the requirement in Section 3 that a district court shall
stay a trial “on application of one of the parties…” But as explained above, Section
3 does not apply to an action in which all claims are subject to arbitration. Thus,
Section 3 does not preclude a district court from dismissing such an action even
where the party invoking arbitration seeks only a stay. Simply put, “even where a
party seeks a stay under § 3, the court has discretion to dismiss under Rule 12(b)(6)
if it finds that all of the claims are arbitrable.” Luna v. Kemira Specialty, Inc., 575
F.Supp.2d 1166, 1178 (C.D. Cal. 2008). See also Sparling, 864 F.2d at 637-38
(rejecting the argument that dismissal, rather than a stay, was improper where party
invoking arbitration sought only a stay). District courts in this Circuit have regularly
exercised that discretion. See, e.g., Griffin v. Gutter Grate of Troy/Birmingham, 546
F.Supp.2d 469, 472 (E.D. Mich. 2008) (dismissing an action in which all claims
were subject to arbitration even though party invoking arbitration sought only a
stay); The Detroit Edison Co. v. Burlington Northern and Santa Fe Ry. Co., 442

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F.Supp.2d 387, 394 (E.D. Mich. 2006) (same); Tolbert v. Coast to Coast Dealer
Serv., Inc., 789 F.Supp.2d 811, 818-19 (N.D. Ohio 2011) (same).
3
Next, Ford argues that a district court should not be permitted to dismiss an
action in which all claims are subject to arbitration because a dismissal would
undermine the FAA’s policy of encouraging prompt and efficient arbitration
proceedings. Ford highlights that a dismissal order is immediately appealable, and
Ford contends that “allowing a district court to ‘dismiss the action rather than enter
a stay’ would ‘deprive’ a party who has been held entitled to arbitration … of an
important benefit which the FAA intended him to have – the right to proceed with
arbitration without the substantial delay arising from an appeal.’” (Ford Supp. Br.,
ECF No. 62, PageID.1377, quoting Lloyd, 369 F.3d at 240.)
This argument conflicts with the Sixth Circuit’s analysis in ATAC Corp. v.
Arthur Treacher’s, Inc., 280 F.3d 1091 (6th Cir. 2002). In that case, the court
examined the circumstances under which it has jurisdiction to hear an appeal from
an order “deferring to arbitration.” Id. at 1095-1101. The court reaffirmed its prior
holding in Arnold, supra, that a party may immediately appeal from an order “which
dismisses an action in deference to arbitration” and is accompanied by “a final
judgment.” Id. at 1096 (emphasis in original) (quoting Arnold). The court offered a
lengthy defense of its rule permitting immediate appeals from dismissal orders. It

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opined that such appeals would not create intolerable inefficiencies because district
courts can be trusted to “choose carefully between issuing stays [which are not
immediately appealable] and dismissals [which are immediately appealable]….” Id.
at 1100. The court noted that “the savings to the courts [of permitting immediate
appeals from dismissal orders] are dwarfed by the savings to the parties of not
appealing such cases.” Id. The court then explained that allowing immediate appeals
from dismissal orders would not undermine the pro-arbitration goals of the FAA:
There is little reason to think that future parties will appeal
dismissals ordered in deference to arbitration when they
are highly unlikely to prevail. Parties will not want to
accrue additional costs when they will have no choice in
the end but to proceed with arbitration anyway. Hence, this
circuit’s approach [of allowing district courts to enter
orders of dismissal which may be immediately appealed]
promises to be quite efficient prospectively, once district
courts and future parties recognize the implication of the
rule.
***
[And,] in cases where there is a genuine legal question
concerning arbitrability, a dismissal rather than a stay
allows that question to be determined promptly on appeal.
On the other hand, in the large majority of cases, the
district court can speed along an arbitration about whose
validity it thinks there is little legal dispute by staying the
action rather than dismissing it. The statute appears to
contemplate this case-management advantage, and the
courts of appeals should enforce that statutory scheme
rather than create another test for appealability not
grounded in the language of the statute.
Id.

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Finally, the court stressed that the entry of immediately appealable dismissal
orders would not substantially expand the number of appeals from pro-arbitration
decisions because district courts “may already elect to certify or not certify [under
28 U.S.C. § 1292] an interlocutory order for immediate appellate review.” Id. at
1000. Stated another way, since district courts already have the authority to permit
an interlocutory appeal from an otherwise non-appealable stay order, allowing
district courts to permit an immediate appeal by entering a dismissal order would not
meaningfully change the volume of appeals from pro-arbitration decisions. ATAC
illustrates that the Sixth Circuit trusts district courts to allow sensible immediate
appeals from pro-arbitration decisions (by entering an order of dismissal) and to
preclude such appeals when they would inhibit efficiency (by entering a nonappealable stay order).
In sum, while ATAC technically involved only a question of appellate
jurisdiction, the court’s analysis unmistakably evidences the Sixth Circuit’s view
that the entry of an immediately appealable dismissal order does not undermine the
pro-arbitration policy of the FAA.

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III
The Court concludes that dismissal of this action, rather than a stay, is
appropriate. First, the history of this action makes clear that all of Arabian Motors’
remaining, non-moot claims are subject to arbitration. Arabian Motors – the only
party resisting arbitration – has never suggested that any of its claims in this action
fall outside of the Resale Agreement’s mandatory arbitration provision. Instead,
Arabian Motors has contended only that that the Fairness Act renders the mandatory
arbitration provision unenforceable. This Court rejected that argument when it
denied Arabian Motors’ motion for a preliminary injunction. (See Op. and Order,
ECF No. 18.). The Arbitrator who was assigned to adjudicate the dispute between
Ford and Arabian Motors then squarely rejected Arabian Motors’ contention that the
Fairness Act bars enforcement of the mandatory arbitration provision. (See
Arbitrator’s Final Award, ECF No. 32-2.) And this Court and the Sixth Circuit later
declined to disturb the Arbitrator’s determination that the Fairness Act does not bar
enforcement of the mandatory arbitration provision. (See Order, ECF No. 37;
Arabian Motors, 775 F. App’x at 216.) Simply put, the sole basis for avoiding
arbitration has been rejected by this Court and then again by the Arbitrator who has
jurisdiction over this dispute, and the Sixth Circuit has declined to disturb

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Arbitrator’s ruling. It is thus clear at this point in the litigation that all of the
remaining claims are subject to arbitration.9
Second, entering a dismissal and permitting an immediate appeal would make
good sense for the reasons identified in ATAC, supra. Here, “there is a genuine legal
question concerning arbitrabilty,” and “a dismissal rather than a stay allows that
question to be determined promptly on appeal.” ATAC, 280 F.3d at 1101. The
dispute over arbitrability here is particularly well-suited for a prompt resolution on
appeal because the dispute turns upon a purely legal question of statutory
interpretation: whether the Fairness Act applies to foreign automobile dealers. The
Sixth Circuit can decide that issue efficiently and without any need for a deep dive
into a detailed evidentiary record. It makes sense to resolve this purely legal issue

9

Ford counters that the Arbitrator has not yet decided whether Arabian Motors’
remaining, non-moot claims are subject to arbitration and that it is at least possible
that some of those claims “would come back to this Court for a trial on the nonarbitrable issues.” (Ford’s Supp. Br., ECF No. 62, PageID.383.) While it is true, as
a purely technical matter, that the Arbitrator has not yet specifically ruled that
Arabian Motors’ remaining, non-moot claims are subject to arbitration, he has
already rejected Arabian Motors’ sole argument for avoiding arbitration – i.e., its
argument that the Fairness Act bars enforcement of the mandatory arbitration
provision of the Resale Agreement. Thus, there is no reasonable possibility that any
of Arabian Motors’ remaining claims will be returned to this Court for trial. In any
event, courts have entered orders of dismissal where, as here, all claims must be
presented to an arbitrator for his determination as to whether they are arbitrable. See,
e.g., W & T Travel Serv., 69 F.Supp.2d at 174 (“In light of the conclusions set out
above, however, that the arbitration requirement survives termination of the
Subcontract, which vests authority with the arbitrators, not this Court, to determine
arbitrability, no issues are left for this Court to resolve. In these circumstances,
dismissal is appropriate.”).
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now rather than sending the parties off to conduct an arbitration that could be costly,
lengthy, and unnecessary (if Arabian Motors were to persuade the Sixth Circuit that
this Court erred in holding that the Fairness Act does not bar enforcement of the
arbitration provision in the Resale Agreement).10
IV
For all of the reasons explained above, Ford’s motion for a stay (ECF No 55
is DENIED and Arabian Motors’ remaining, non-moot claims are DISMISSED
WITHOUT PREJUDICE.11 See Milan Exp. Co. v. Applied Underwriters Captive
Risk Assur. Co., 590 F. App’x 482, 486 (6th Cir. 2014) (explaining that Sixth Circuit
has “approved” a dismissal without prejudice “in several cases” in which district
courts have determined that all claims are subject to arbitration). And to be clear:
the Court intends for this dismissal to be a final decision on the merits that is subject
to immediate appeal by Arabian Motors. See Howell v. Rivergate Toyota, 144 F.

10

The Court earlier declined to certify for interlocutory review its opinion and order
denying Arabian Motors’ motion for a preliminary injunction staying the arbitration
commenced by Ford. (See Order, ECF No. 30.) As the Court explained in detail, it
made sense to deny appellate review at that time given the procedural posture of
both this action and the underlying arbitration. (See id., PageID.936-939.) The
procedural issues that weighed heavily against appellate review earlier have largely
dissipated and no longer tip the scales against such review.
11

As a reminder, the Court has dismissed as moot Count I of Arabian Motors’
Complaint and the portion of Count II that seeks a declaratory judgment that Arabian
Motors should not be compelled to arbitrate Ford’s claims. The Court dismisses the
remainder of Arabian Motors’ claims without prejudice.
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App’x 475, 477 (6th Cir. 2005) (holding that an order dismissing an action without
prejudice on ground that claims are subject to arbitration is a “final decision” that
may be immediately appealed); Hilton, 687 F. App’x at 518 (same).12
IT IS SO ORDERED.
s/Matthew F. Leitman
MATTHEW F. LEITMAN
UNITED STATES DISTRICT JUDGE
Dated: October 15, 2020

I hereby certify that a copy of the foregoing document was served upon the
parties and/or counsel of record on October 15, 2020, by electronic means and/or
ordinary mail.
s/Holly A. Monda
Case Manager
[phone]

12

The Sixth Circuit said that it would entertain an appeal after this Court entered “a
decision that ends the litigation on the merits by disposing of the claims alleged in
the complaint.” Arabian Motors, 775 F. App’x at 217 n.1. A dismissal without
prejudice that “send[s] all issues to arbitration and leaving the district court nothing
more to do than execute the judgment” does “end[] the litigation on the merits” and
is a “final decision” over which a federal court of appeals “ha[s] appellate
jurisdiction.” Griggs v. S.G.E. Man., LLC, 905 F.3d 835, 844 (5th Cir. 2018). See
also Blair v. Scott Specialty Gases, 283 F.3d 595, 600-03 (3d Cir. 2002) (holding
that order dismissing complaint without prejudice on ground that all claims were
subject to arbitration was an immediately appealable “final decision” and collecting
cases with same holding).
32