Webb v. Farmers of North America, Inc.

Filing 41

ORDER - the Court DENIES IN PART Defendant's Motion to dismiss for lack of subject matter jurisdiction 33 . The alternative motion to compel arbitration is GRANTED. It is ORDERED that proceedings in this case are stayed pending arbitration. P arties shall file a Joint Status Report on or before January 16, 2018, and every six months thereafter until the matter is concluded. All remaining motions are DENIED AS MOOT. Signed on 7/13/17 by District Judge Fernando J. Gaitan, Jr. (Enss, Rhonda)

IN THE UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF MISSOURI
WESTERN DIVISION
JAMES WEBB,
Plaintiff,
v.
FARMERS OF NORTH AMERICA,
INC., and JAMES MANN,
Defendants.

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Case No. 4:16-cv-00080-W-FJG

ORDER
Currently pending before the Court is defendants’ Farmers of North America, Inc.
(“FNA”) and James Mann’s (“Mann”), Motion to Dismiss for Lack of Subject Matter
jurisdiction (Doc. No. 33). Also before the court is plaintiff’s motion to file a surreply in
opposition to defendants’ motion to dismiss (Doc. No. 39). As an initial matter, the
Court finds a surreply to be unnecessary and DENIES plaintiff’s motion for leave to file
same (Doc. No. 39).
I. BACKGROUND
On February 1, 2016, plaintiff filed the present suit in the United States District
Court for the Western District of Missouri. After some time, on July 27, 2016 Plaintiff
executed service in accordance with The Hague Service Convention upon Defendant
FNA in Saskatoon, Saskatchewan. The defendant FNA is the spinoff of a Canadian
company by the similar name, Farmers of North America, hereinafter “FNA Canada”;
the like businesses’ plan is to provide a subscription-based membership organization,
“like a COSTCO or SAM’S CLUB, that used a membership structure to enhance buying
power and pricing of commonly used and desired farming products and needs.” (Doc.
No. 25 at 4). The plaintiff alleges in his First Amended Complaint (“FAC”) (Doc. No. 25),
that defendants FNA and Mann, the CEO of FNA, (1) breached the employment

contract; (2) made fraudulent misrepresentations in the employment negotiations; and
(3) intentionally interfered with the rights of the plaintiff.
Plaintiff claims in the FAC this Court has diversity jurisdiction over this case, as
plaintiff is a Missouri citizen, and FNA is incorporated in Delaware.1 Defendants
subsequently filed their motion to dismiss for lack of subject matter jurisdiction (Doc. No.
33), which also argues that in the event the court finds subject matter jurisdiction exists,
the court should compel the parties to arbitrate as per the employment agreement
between the parties. Defendant also seeks the dismissal of Count III – intentional
interference – as a matter of law.

II. DISCUSSION
A. Diversity Jurisdiction.
1. Standard
Motions to dismiss for lack of subject matter jurisdiction are governed by Rule
12(b)(1). Additionally, 28 U.S.C. § 1332(a)(1) states that the district courts shall have
original jurisdiction in civil actions between citizens of different States when the amount
in controversy exceeds $75,000. “Complete diversity of citizenship exists where no
defendant holds citizenship in the same state where any plaintiff holds citizenship.” One
Point Solutions, LLC v. Borchert, 486 F.3d 342, 436 (8th Cir. 2007)(citing Owen Equip.
& Erection Co. v. Kroger, 437 U.S. 365, 373, 98 S.Ct. 2396 (1978)).
The plaintiff shall have the “burden to establish the factual bases for the subject
matter jurisdiction plaintiff invokes.” Wilkerson v. Mo. Dep't of Mental Health, 279 F.
Supp. 2d 1079, 1080 (E.D. Mo. 2003) (citing Osborn v. United States, 918 F.2d 724,
730 (8th Cir. 1990). Corporations have dual citizenship for diversity purposes, both the
state of its incorporation and the location of its “principal place of business.” 28 U.S.C. §
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Mann is a citizen of Canada.
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1332(c)(1). In Hertz Corp. v. Friend, 130 S.Ct. 1181 (2010), the Supreme Court adopted
the “nerve center” test to clarify the principal place of business, that is “where a
corporation’s officers direct, control and coordinate the corporation’s activities.” Hertz,
130 S.Ct. at 1192.
It is also well established that “[w]here there is no change of party, a jurisdiction
depending on the condition of the party is governed by that condition, as it was at the
commencement of the suit.” Connoly v. Taylor, 27 U.S. 556, 565 (1829); see also Grupo
Dataflux v. Atlas Global Group, L.P., 541 U.S. 567, 571 (2004); Centrue Bank v. Golf
Disc. of St. Louis, Inc., No. 4:10CV16 TIA, 2010 WL 4178942, at *2 n.1 (E.D.Mo. 2010)
(“For purposes of diversity jurisdiction, the Court analyzes citizenship as of the date that
the Complaint was filed.” (Internal citations omitted)).
2. Analysis
In their motions, the parties dispute the location of FNA’s nerve center. “In a
facial challenge to jurisdiction, all of the factual allegations concerning jurisdiction are
presumed to be true and the motion is successful if the plaintiff fails to allege an
element necessary for subject matter jurisdiction.” Titus v. Sullivan, 4 F.3d 590, 593 (8th
Cir. 1993). Here, defendants challenge that FNA’s principal place of business, although
being incorporated in Delaware, is located in the same state as the plaintiff’s citizenship,
in Missouri. To advance their theory, defendants allege that plaintiff Webb, the former
COO of FNA, used his home address as FNA’s ‘principal place of business’ when
registering to do business in Missouri (Doc. No. 33-1, at 3). Defendants argue that
plaintiff ran the company from Missouri, exemplified by plaintiff’s registering of a post
office box, writing the initial marketing and business plans and performing the initial
hiring decisions, all from Missouri (Doc No. 36, at 3-4, citing Aff. of James Webb (Doc.
No. 35-1)).
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In response, the plaintiff argues that FNA, much like its spinoff-model FNA
Canada, is controlled by citizens of Canada, in Canada. “It was there that life was given
to any idea or project, approval was given to any action, but most important, funding
was provided or declined for any expenditure concerning FNA.” (Doc. No. 35, at pg. 3).
Both parties present considerable arguments as to the location of the nerve
center during the start-up’s beginning and duration. However, for purposes of diversity
jurisdiction, the law looks to the principal place of business at the time of filing the
complaint. Golf Disc. of St. Louis, Inc., 2010 WL 4178942, at *2. Accordingly, in this
instance, even if the principal place of business had been located Missouri at some
point during the entity’s duration, it is clear that the nerve center moved to Canada prior
to the filing of this lawsuit. Here, Plaintiff states in his first amended complaint that he
was directed by Defendant Mann to terminate the entire staff in April 2015 and that he,
the plaintiff, was terminated on June 19, 2015. “Seven months following the meeting
with Mann where Plaintiff was directed to terminate his staff, all remaining AC US
[FNA’s sister company] personnel were also terminated and AC US was shut down on
September 28, 2015[,] [sic] [w]iping out the $3,000,000 investment that FNA Canada
had made in launching AC US . . . .” (Doc. No. 25, at 12). By the time this suit was filed
on February 1, 2016, Missouri operations had ceased, and the remaining control of the
entity (such as the decision to terminate the Plaintiff) was with the CEO, defendant
Mann in Canada. Thus, neither defendant is a Missouri citizen for purposes of diversity
jurisdiction.
Therefore, for the foregoing reasons, defendants’ motion to dismiss for lack of
jurisdiction is DENIED.
B. Arbitration.
1. Standard
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“A court must grant a motion to compel arbitration if a valid arbitration clause
exists which encompasses the dispute between the parties.” 3M Co. v. Amtex Security,
Inc., 542 F.3d 1193, 1198 (8th Cir. 2008)(citations omitted). The Supreme Court has
interpreted the Federal Arbitration Act (“FAA”) as ensuring the enforceability of
arbitration agreements. See Bass v. Carmax Auto Superstores, Inc., 2008 WL 2705506
(W.D.Mo. July 9, 2008)(citing Mastobuono v. Shearson-Lehman Hutton, Inc., 514 U.S.
52 (1995); Moses H. Cone Mem'l Hosp. v. Mercury Const. Corp., 460 U.S. 1 (1983)).
The central purpose of the FAA is to “ensure that private agreements to arbitrate are
enforced according to their terms.” Mastobuono, 514 U.S. at 54. While the FAA sets
forth a “liberal federal policy favoring arbitration agreements,” a party may not be forced
to arbitrate its dispute without an agreement to do so. Moses H. Cone Mem’l Hosp. v.
Mercury Const. Corp., 460 U.S. 1,23, 103 S. Ct. 927 (1983).
“The Supreme Court has found questions of arbitrability presumptively for a
court to decide to include whether the parties are bound by an arbitration agreement
and whether an arbitration agreement applies to a particular type of controversy.”
Woods v. Caremark PHC, L.L.C., 198 F.Supp.3d 1046, (W.D. Mo. Aug. 02, 2016) (citing
Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 84, 123 S.Ct. 588, 154 (2002));
See also Newspaper Guild of St. Louis, Local 36047 v. St. Louis Post Dispatch, LLC,
641 F.3d 263, 266 (8th Cir .2011) (“[W]hen deciding whether to compel arbitration, a
court asks whether a valid agreement to arbitration exists, and if so, whether the dispute
falls within the scope of that agreement.”) However, “[w]here a broad arbitration clause
is in effect, even the question of whether the controversy relates to the agreement
containing the clause is subject to arbitration.” Larry's United Super, Inc. v. Werries, 253
F.3d 1083 (8th Cir. 2001).

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2. Analysis
The Court first turns to whether the arbitration agreement is valid. This question
“is a matter of state contract law.” Faber v. Menard, Inc., 367 F.3d 1048, 1052 (8th Cir.
2004). Here, the parties specified that Delaware law controls:
Notwithstanding that any of the parties hereto may now, or at any time
during the term of this Agreement, be domiciled outside of the State of
Delaware, United States of America, this Agreement shall be regarded for
all purposes as a Delaware, United States of America document and the
validity and construction hereof, and all acts and payments required
hereunder, shall be determined and governed, in all respects, by the laws
of the State of Delaware, United States of America.
Employment agreement between FNA and James Webb (Doc. No. 1-3, at 8).
In PVI, Inc. v. Ratiopharm GmbH, 253 F.3d 320, 329 (8th Cir. 2001), the Eighth
Circuit, applying Missouri choice of law principals in a contractual dispute between
Missouri and Delaware citizens, held that “contractual rights were substantive and
therefore Missouri law dictated that Delaware law should govern.” Under Delaware law,
as to questions regarding “substantive arbitrability” or the threshold question of validity
of the arbitration agreement, Delaware law “adopt[s] the majority federal view that
reference to the American Arbitration Association (“AAA”) rules evidences a clear and
unmistakable intent to submit arbitrability issues to an arbitrator.” James & Jackson,
LLC v. Willi Gary, LLC, 906 A.2d 76, 80 (Del. 2006). Here, the arbitration provision
exclusively mandates AAA rules apply:
Webb and FNA agree to first mediate all disputes in good faith and may
then submit to binding arbitration any claims that they may have against
each other, of any nature whatsoever, other than those prohibited by law
or for workers compensation, unemployment or disability benefits,
pursuant to the rules of the American Arbitration Association. Webb
agrees to this alternative dispute resolution process as a condition of
employment.
Employment agreement between FNA and James Webb (Doc. No. 1-3, at 8)(emphasis
added).
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Furthermore, the broad language of the contract provision demonstrates that the
validity questions shall go before the arbitrator. The parties “may then submit to binding
arbitration any claims that they may have against each other, of any nature whatsoever
. . . . Webb agrees to this [ADR] as a condition of employment.” (Doc. No. 1-3, at 8).
Therefore, along with plaintiff’s causes of actions, any claims as to the validity or scope
of the arbitration provision will go to the arbitrator in the first instance.
Given that the parties have already completed a mediation of this matter, the
Court finds that defendants’ motion to compel arbitration must be GRANTED.

III. CONCLUSION
For these reasons, the Court hereby DENIES IN PART Defendant's Motion to
dismiss for lack of subject matter jurisdiction. The alternative motion to compel
arbitration is hereby GRANTED. It is ORDERED that proceedings in this case are
stayed pending arbitration.

It is further ORDERED that the parties shall file a Joint

Status Report on or before January 16, 2018, and every six months thereafter until the
matter is concluded. All remaining motions are DENIED AS MOOT.
IT IS SO ORDERED.

Date: _July 13, 2017
Kansas City, Missouri

/S/ FERNANDO J. GAITAN, JR.
Fernando J. Gaitan, Jr.
United States District Judge

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