Southern Industrial Contractors, LLC v. Neel-Schaffer, Inc. et al

Filing 284

MEMORANDUM OPINION AND ORDER denying 194 Motion for Summary Judgment; granting 211 Motion to Stay Proceedings; denying 267 Motion for Leave to File Sur-Reply Memorandum in Opposition to Motion for Summary Judgment; denying 271 Motion to Compe l. This lawsuit is STAYED pending theappeal of the decision ordering arbitration in Southern Industrial Contractors, LLC v. Mississippi State Port Authority, cause number 251-16-681CIV First Judicial District of Hinds County, Mississippi; and Ordered that all other pending motions filed in this lawsuit are denied without prejudice. Signed by District Judge Louis Guirola, Jr. on 6/26/18. (RLW)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
SOUTHERN DIVISION
SOUTHERN INDUSTRIAL
CONTRACTORS, LLC
v.

PLAINTIFF
CAUSE NO. 1:17CV255-LG-JCG

NEEL-SCHAFFER, INC.; T.L.
WALLACE CONSTRUCTION, INC.;
THOMPSON ENGINEERING, INC.;
CH2M HILL, INC.; W.G. YATES &
SONS CONSTRUCTION
COMPANY; ROY ANDERSON
CORP.; YATES ANDERSON, JV;
QUALITY ENGINEERING
SERVICES, INC.; and MISSISSIPPI
DEVELOPMENT AUTHORITY

DEFENDANTS

MEMORANDUM OPINION AND ORDER GRANTING
THOMPSON ENGINEERING, INC.’S MOTION TO STAY
BEFORE THE COURT is the [211] Motion to Stay filed by the defendant
Thompson Engineering, Inc., and joined by T.L. Wallace Construction, Inc., NeelSchaffer, Inc., WG Yates & Sons Construction Company, Roy Anderson Corp.,
Yates-Anderson, JV, CH2M Hill, Inc., and Quality Engineering Services, Inc. The
Motion has been fully briefed. After reviewing the submissions of the parties, the
record in this matter, and the applicable law, the Court finds that this lawsuit
should be stayed pending the appeal of the decision ordering arbitration in
Southern Industrial Contractors, LLC v. Mississippi State Port Authority, cause
number 251-16-681CIV, First Judicial District of Hinds County, Mississippi.

BACKGROUND
I. Federal Court Action
The plaintiff Southern Industrial Contractors, LLC, served as the general
contractor for the West Pier Facilities project at the Port of Gulfport, Mississippi. It
filed this lawsuit against the project’s owner, Mississippi Development Authority, as
well as the project’s consultants and engineers — Neel-Schaffer, Inc., CH2M, T.L.
Wallace Construction, Inc., Thompson Engineering, Inc., W.G. Yates & Sons
Construction Company, Roy Anderson Corp., Yates Anderson, JV, and Quality
Engineering Services, Inc. (hereafter sometimes collectively referred to as “the
Consultant Defendants”). Southern Industrial alleges that these defendants failed
to provide notice of a large underground debris field at the project site. Southern
Industrial claims that the Consultant Defendants directed it to excavate the debris,
which made the project much more expensive and time-consuming. On November
30, 2017, the Court granted Mississippi Development Authority’s Motion to Dismiss
pursuant to the doctrine of sovereign immunity. All of the remaining defendants
now ask this Court to stay this lawsuit pending the state court appeal of the
decision ordering arbitration in Southern Industrial Contractors, LLC v. Mississippi
State Port Authority, cause number 251-16-681CIV, First Judicial District of Hinds
County, Mississippi.
II. State Court Action
On November 16, 2016, Southern Industrial filed a Complaint in the Circuit
Court of Hinds County, Mississippi, against the Mississippi State Port Authority,

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asking the court to compel the Port Authority to submit to arbitration pursuant to
the contract entered into by Southern Industrial and the Port Authority. In its
state court Complaint, Southern Industrial alleges that the Port Authority was the
owner of the West Pier Facilities project, and Southern Industrial served as the
general contractor. The Complaint further alleges that Southern Industrial found a
large underground debris field while trying to drive pilings for the project, and that
the Port Authority directed Southern Industrial to excavate and remove some of the
debris. Southern Industrial asserts that the Port Authority is liable:
for all losses sustained by [Southern Industrial] as a result of [the Port
Authority’s] breach of its contractual obligations, including without
limitation, all amounts incurred by the Project being delayed and all
amounts for additional time, effort, manpower, labor, machinery and
money for which [Southern Industrial] has not been paid.
(State Court Compl. at 4, ECF No. 210-3). The Circuit Court granted Southern
Industrial’s Motion to Compel Arbitration, and the Port Authority appealed. The
Port Authority filed its reply brief with the Mississippi Court of Appeals on June 20,
2018.
DISCUSSION
The defendants seek a stay pursuant to Section 3 of the Federal Arbitration
Act (FAA), which 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 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

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agreement, providing the applicant for the stay is not in default in
proceeding with such arbitration.
9 U.S.C.A. § 3. This statute generally only applies to the parties who signed the
agreement containing the arbitration clause. Rainier DSC 1, L.L.C. v. Rainier
Capital Mgmt., L.P., 828 F.3d 356, 360 (5th Cir. 2016). However, district courts
have discretion “to stay litigation among the non-arbitrating parties pending the
outcome of the arbitration.” Moses H. Cone Memorial Hosp. v. Mercury Constr.
Corp., 460 U.S. 1, 21 n. 23 (1983). The Fifth Circuit has held that claims among
non-signatories can be stayed where: “(1) the arbitrated and litigated disputes
involve the same operative facts; (2) the claims asserted in the arbitration and
litigation are “inherently inseparable”; and (3) the litigation has a “critical impact”
on the arbitration.” Id. (quoting Waste Mgmt., Inc., v. Residuos Industriales
Multiquim, S.A. de C.V., 372 F.3d 339, 343 (5th Cir. 2016)). “The question is not
ultimately one of weighing potential harm to the interests of the non-signatory, but
of determining whether proceeding with litigation will destroy the signatories’ right
to a meaningful arbitration.” Waste Mgmt., Inc., 372 F.3d at 343.
Southern Industrial first argues that the FAA does not govern, because it did
not seek to compel arbitration pursuant to the FAA. However, the FAA governs
arbitration provisions in contracts pertaining to interstate or foreign commerce. 9
U.S.C. §§ 1, 2. The United States Supreme Court has interpreted the word
“involving commerce” in the FAA as broadly as the term “affecting commerce,”
which has been held to mean “a full exercise of constitutional power.” Allied-Bruce
Terminix Cos., Inc. v. Dobson, 513 U.S. 265, 273-74 (1995). The project at issue in
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both this lawsuit and the state court lawsuit involves construction of an
international port. The parties to the contract containing the arbitration provision
— Mississippi Port Authority and Southern Industrial — are residents of
Mississippi and Louisiana, respectively. Therefore, the contract containing the
arbitration clause certainly “involved” or “affected commerce,” and the FAA governs
the arbitration clause.
Southern Industrial next argues that the defendants are not entitled to a
stay, because a final arbitration order has not been entered in state court. Southern
Industrial claims that this Court would therefore have to determine whether
Southern Industrial and the Port Authority entered into a binding arbitration
agreement before this Court could impose a stay. However, the Circuit Court of
Hinds County has in fact ordered the state court parties to proceed to arbitration,
and the likelihood that the Mississippi Court of Appeals may overturn that ruling
does not prevent this Court from imposing a stay pending the outcome of the
appeal.
Southern Industrial also argues that its federal case against the Consultant
Defendants will not destroy its right to arbitration, because its tort claims against
the Consultant Defendants are separate from its breach of contract claims against
the Port Authority. The Complaints Southern Industrial filed in federal and state
court contradict this assertion, as Southern Industrial alleges that the Port
Authority and the Consultant Defendants are both liable for the losses Southern
Industrial suffered due to the alleged debris field at the project site. Southern

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Industrial also made contradictory assertions in its Complaints that the Port
Authority and the Consultant Defendants ordered Southern Industrial to remove
the underground debris. In the federal case, Southern Industrial argues that it is a
third-party beneficiary of the contracts entered into by the Consultant Defendants
and the Port Authority, which it sued separately in state court. Both cases hinge on
the question of whether the plans for the project were defective. Southern
Industrial’s admission, that it intends to use discovery conducted in this lawsuit in
the arbitration proceeding against the Port Authority, further demonstrates that
the claims in this lawsuit are inextricably intertwined with the claims made against
the Port Authority.
This Court must consider not only Southern Industrial’s right to meaningful
arbitration, but also the Port Authority’s right to meaningful arbitration even
though the Port Authority may oppose arbitration. A plaintiff’s attempt to recover
the same damages in arbitration and litigation warrants imposition of a stay of
litigation against a non-signatory. See Waste Mgmt., 372 F.3d at 345. In this
situation, “[a]llowing the instant litigation to proceed would risk inconsistent
results, and ‘substantially impact’ the arbitration[],” because the “arbitrator would
necessarily be strongly influenced to follow the court’s determination.” See id.1 For

Southern Industrial states that it will seek leave of Court to amend its federal and
state court Complaints to state different claims against the Consultant Defendants
and the Port Authority. It is unclear how amendment of the Complaints could
change this Court’s determination, as both Complaints arose out of the same facts
and seek damages for problems caused by the same debris field and the same
allegedly defective plans. In addition, it is troubling that Southern Industrial did
1

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example, if a jury in the federal lawsuit found that the plans were defective, then
such a determination would inevitably affect the arbitration against the Port
Authority. As a result, the Port Authority’s potential liability would be seriously
affected by any judgment entered in this lawsuit. See id. The Consultant
Defendants are therefore entitled to a stay of this litigation at least until the
Mississippi Court of Appeals resolves the appeal.
Southern Industrial relies on Salas v. GE Oil & Gas, 857 F.3d 278 (5th Cir.
2017), for the proposition that the Consultant Defendants waived their right to seek
a stay of the federal litigation due to their participation in this lawsuit. In Salas,
the Fifth Circuit held that “[a] party waives its right to arbitrate if it (1)
substantially invokes the judicial process and (2) thereby causes detriment or
prejudice to the other party.” Salas, 857 F.3d at 281. Assuming for the sake of
argument only that the waiver doctrine can be applied to prevent a nonsignatory
from obtaining a stay, Southern Industrial has not demonstrated that it has been
prejudiced by the Consultant Defendants’ efforts to defend themselves in this
lawsuit filed by Southern Industrial.
In the alternative, Southern Industrial claims that any stay order should not
prevent the parties from continuing to conduct discovery in this lawsuit to prevent
prejudice caused by delay. However, Southern Industrial has not precisely
articulated precisely how a delay will result in prejudice. In the interest of judicial

not seek to amend its Complaints prior to the filing of the Consultant Defendants’
Motion to Stay.
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economy and in an effort to reduce the potential for wasted time and resources, the
Court will impose a complete stay pending the outcome of the state court appeal.
CONCLUSION
For the foregoing reasons, the Court finds that this lawsuit should be stayed
pending the appeal of the decision ordering arbitration in Southern Industrial
Contractors, LLC v. Mississippi State Port Authority, cause number 251-16-681CIV
First Judicial District of Hinds County, Mississippi. The parties are instructed to
notify this Court immediately upon resolution of the state court appeal, and to file
an appropriate motion either seeking to extend the stay pending conclusion of the
arbitration or seeking to lift the stay. To the extent the Court has not addressed
any of the parties’ arguments, it has considered them and determined that they
would not alter this result.
IT IS, THEREFORE, ORDERED AND ADJUDGED that the [211] Motion
to Stay filed by the defendant Thompson Engineering, Inc., and joined by T.L.
Wallace Construction, Inc., Neel-Schaffer, Inc., WG Yates & Sons Construction
Company, Roy Anderson Corp., Yates-Anderson, JV, CH2M Hill, Inc., and Quality
Engineering Services, Inc., is GRANTED. This lawsuit is STAYED pending the
appeal of the decision ordering arbitration in Southern Industrial Contractors, LLC
v. Mississippi State Port Authority, cause number 251-16-681CIV First Judicial
District of Hinds County, Mississippi.
IT IS, FURTHER, ORDERED AND ADJUDGED that all other pending
motions filed in this lawsuit are DENIED WITHOUT PREJUDICE.

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SO ORDERED AND ADJUDGED this the 26th day of June, 2018.

s/

Louis Guirola, Jr.

LOUIS GUIROLA, JR.
UNITED STATES DISTRICT JUDGE

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