Arctic Glacier U.S.A., Inc. et al v. Principal Life Insurance Company
MEMORANDUM OPINION. Signed by Judge Paula Xinis on 6/19/2017. (jf3s, Deputy Clerk) [Transferred from Maryland on 6/21/2017.]
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
ARCTIC GLACIER U.S.A., INC., et al.,
Civil Action No. PX 16-3555
PRINCIPAL LIFE INSURANCE COMPANY, *
Pending before the Court is a “Petition to Compel Arbitration and Other Dispute
Resolution Procedures,” ECF No. 1, pursuant to the 9 U.S.C. § 4 of the Federal Arbitration Act,
filed by Arctic Glacier U.S.A., Inc. (“Arctic Glacier U.S.A.”) and the Arctic Glacier U.S.A., Inc.
Savings and Retirement Plan (“the Plan,” and collectively, “Petitioners”). Respondent Principal
Life Insurance Company (“Respondent”) opposes the Petition. See ECF No. 7. 1 For the reasons
stated below, the Court orders that this case be transferred to the United States District Court for
the District of Nebraska, consistent with the arbitration clause in the pertinent agreement.
Arctic Glacier U.S.A. is a Delaware corporation headquartered in the state of Minnesota
and is in the business of providing packaged ice products. The Plan is a retirement benefits plan
sponsored by Arctic Glacier U.S.A. for their employees. See Service Agreement, ECF No. 1-1 at
2. Respondent Principal Life Insurance Company is an Iowa corporation with its principal place
Because Plaintiff’s Petition is to be treated as a motion, Respondent’s pleading shall be treated as a
response in opposition. See Liberty Mut. Grp., Inc. v. Wright, No. DKC 12-0282, 2012 WL 718857, at *7
(D. Md. Mar. 5, 2012) (“Applications filed pursuant to § 6 are, therefore ‘motions . . . rather than
complaint[s] initiating . . . plenary action.’” (quoting D.H. Blair & Co. v. Gottdiener, 462 F.3d 95, 108
(2d Cir. 2006)).
of business also in Iowa, licensed to conduct business as an insurance company in the state of
Maryland. 2 See ECF No. 1 at 3.
According to the Petition, Respondent entered into a Service and Expense Agreement
(the “Agreement”) with Arctic Glacier International, Inc. as the Plan’s original sponsor, effective
January 1, 2011. See Service Agreement, ECF No. 1-1; see also ECF No. 1 at 1. 3 The “Duration
of Agreement” provision in the Agreement states that the “Agreement will remain in effect
indefinitely. It will be fully binding on the Parties. It will also extend to their respective
successors and assigns.” See Service Agreement, ECF No. 1-1 at 8. However, the Agreement
also requires that “any right, title, interest or performance with regard to this Agreement” may be
assigned only with “the express written agreement of both Parties.” See Service Agreement, ECF
No. 1-1 at 8–9.
Petitioner acknowledges that there is no one document that expressly reflects assignment
to Artic Glacier U.S.A. and the Plan by “express written agreement of both Parties” of the
Agreement. Rather Petitioners include in the Petition documentary evidence supporting that as of
July 2012, the Agreement was assigned from Arctic Glacier International, Inc. to Arctic Glacier
U.S.A. Petitioners specifically include amendments executed by both parties which changed the
Plan’s name from “Arctic Glacier International, Inc. Savings and Retirement Plan” to “Arctic
Glacier U.S.A., Inc. Savings and Retirement Plan.” See Adoption Agreement, ECF No. 1-6 at 12;
see also Letter re “Change in Plan Sponsorship,” ECF No. 1-6 at 5. This Plan amendment,
effective July 27, 2012 and prepared by Respondent, expressly provided that the employer
sponsoring the Plan going forward would be Arctic Glacier U.S.A., and not Arctic Glacier
Maryland law requires out-of-state insurance companies who offer insurance in Maryland to have the
Maryland Insurance Commissioner serve as their statutory agent for the delivery of complaints. See Md.
Code Ann., Ins. § 4–107 (2017).
“Arctic Glacier International, Inc.” is not a party to the Petition.
International. See Adoption Agreement, ECF No. 1-6 at 12. Petitioners also include
Respondent’s submission to the IRS identifying Arctic Glacier U.S.A. as the new employer and
sponsor of the Plan and identifying Arctic Glacier U.S.A’s employees as the Plan participants.
See Principal Financial Group Prototype for Savings Plans, ECF No. 1-6 at 12.
A. The Allegations Underlying the Dispute
In early 2013, the Plan fiduciaries elected to make various changes to the Plan’s
investment options on behalf of Arctic Glacier U.S.A.’s employee-participants to take effect on
April 1, 2013. See ECF No. 1 at 5. Pursuant to the Plan changes, unless the Plan’s participants
made an alternative selection, the Plan’s participants invested by default in funds which were
based upon a participant’s age (“target date funds”). See id. The degree of risk exposure in a
particular target date fund is dependent upon the participant’s anticipated retirement date. See id.
Under the Employee Retirement Income Security Act of 1974 (“ERISA”), Respondent
was required to provide a Notice of Change of Investment Options (“Notice”) to Plan
participants by no later than March 1, 2013. See ERISA § 404(c)(4)(C)(i), 29 U.S.C. §
1104(c)(4)(C)(i) (notices required “at least 30 days and no more than 60 days prior to the
effective date of the change . . . .”). Arctic Glacier U.S.A. provided Respondent with the names
and addresses of the Plan’s participants. See ECF No. 1 at 6; ECF No. 1-4 at 5. According to the
Petition, Respondent failed to provide the requisite notice and instead sent the notices to
nonparticipants. See ECF No. 1 at 6. Consequently, on April 1, 2013, the Plan participants had
their entire retirement account balances and additional future contributions placed into the
applicable default target date funds. See id.
To make matters worse, say Petitioners, Respondent had no mechanism in place to catch
the error. Accordingly, the Plan participant funds were misallocated until January 2014. Had
Respondent employed quality control procedures, “Respondent would have become aware of its
failures and, at a minimum, been able to limit the harm suffered by the Plan and its participants.”
See ECF No. 1 at 7.
B. The Dispute Resolution Procedures of the Agreement
The Agreement that governs the Plan administration contains an arbitration provision.
The parties do not dispute at this stage that Respondent’s alleged notice failures fall under the
Agreement’s arbitration clause. Accordingly, Arctic Glacier U.S.A. and the Plan contend that
Respondent’s refusal to participate in the predicate resolution procedures per the Agreement
justifies this Court compelling Respondent to submit to arbitration pursuant to § 4 of the Federal
Arbitration Act (“FAA”).
The Agreement’s Dispute Resolution clause specifically describes a three-step procedure
of negotiation, mediation, and then arbitration:
*Negotiation. If the Parties cannot resolve a dispute in the ordinary
course of business, the Party claiming a dispute against the other
shall give the other Notice of that dispute in writing, stating the
nature of the dispute and the relevant facts, including
documentation, and referring to this article. The other Party will
then have 15 calendar days to make a complete, written response in
a Notice to the other. The Parties will meet to discuss the dispute.
If practicable and mutually desirable, the Parties will meet in
person. If the dispute remains unresolved for any reason after 60
calendar days following the mailing of the response, the Parties
will then proceed to mediation.
*Mediation. The Parties will, as soon as commercially reasonable
after the 60 calendar day period referred to under negotiation,
above, initiate the mediation process and endeavor in good faith to
settle their dispute by mediation. Unless the Parties agree to the
contrary, the mediation will conform to the then current Mediation
Rules for Commercial Financial Disputes of the American
Arbitration Association or such similar organization as the Parties
may agree. If the Parties cannot agree on a neutral mediator, one
will be appointed by the American Arbitration Association in
accordance with its mediation rules. Mediation will occur within
60 days of the initiation of the mediation process. The Parties will
share equally in the Fees and expenses of the mediator and the cost
of the facilities used for the mediation, but will otherwise bear their
respective costs incurred in connection with the mediation. The
mediation shall be non-binding. If the dispute remains unresolved
for any reason after the completion of the mediation process, the
Parties will then proceed to arbitration.
*Arbitration. If a dispute is to be resolved by arbitration, the
arbitration proceeding will take place in the capital city of the
State, unless the Parties agree to the contrary. The arbitration will
be governed by the Federal Arbitration Act. . . . The arbitrators
must decide the dispute in accordance with the substantive law
which would govern the dispute had it been litigated in court. This
requirement does not, however, mean that the award is reviewable
by a court for errors of law or fact.
Following the arbitration hearing, the arbitrators will issue an
award and a separate written decision that summarizes the
reasoning behind the award and the legal basis for the award. The
arbitrators may not award punitive damages and may not require
one Party to pay another Party’s costs, Fees, attorneys’ Fees, or
expenses. The award of the arbitrators will be binding on each
Party. Judgment upon the award may be entered in any federal
See Service Agreement, ECF No. 1-1 at 11 (Article IV, Dispute Resolution).
On April 11, 2016, Petitioners attempted via written communication with Respondent to
invoke the first “negotiation” phase of dispute resolution. See ECF Nos. 1-2, 1-3, 1-4, 1-5, 1-6.
This was followed by several written exchanges, none of which produced fruitful discussion on
the merits of Petitioners’ claims. Then on October 26, 2016, Petitioners filed the instant Petition
to compel arbitration. ECF No. 1.
Respondent opposes the Petition on two main grounds. First, Respondent contends that
the Petitioners lack Article III standing to compel arbitration because they are not parties to the
Agreement. Along the same lines, Respondent claims that because the Petitioners are not parties
to the Agreement, any claims they may have are not arbitrable. Second, Respondent asserts that
if this Court determines the Petitioners are proper parties, the Court must nonetheless dismiss the
Petition because the Agreement requires that all related disputes be resolved in the District of
Nebraska. ECF No. 7-1. at 7. The Court will first address the jurisdictional issues before
considering whether dismissal is warranted under the Agreement’s forum selection clause. See
Gilbert v. Freshbikes, LLC, 32 F. Supp. 3d 594, 599 (D. Md. 2014) (“Generally, questions of
subject matter jurisdiction must be decided first, because they concern the court's very power to
hear the case.” (quoting Owens–Illinois, Inc. v. Meade, 186 F.3d 435, 442 n.4 (4th Cir. 1999)
(internal quotation marks omitted)).
The Court’s Jurisdiction
A. Legal Standard
Under the FAA, arbitration agreements in contracts “involving commerce” are “valid,
irrevocable, and enforceable.” 9 U.S.C. § 2. The provisions of the FAA may be enforced in state
or federal court, and “[t]he ‘body of federal substantive law’ generated by elaboration of FAA §
2 is equally binding on state and federal courts.” Vaden v. Discover Bank, 556 U.S. 49, 59
(2009). For suits brought in federal court, § 4 of the FAA provides that a petition to compel
arbitration pursuant to an arbitration agreement may be brought in “any United States district
court which, save for such agreement, would have jurisdiction under title 28 . . . of the subject
matter of a suit arising out of the controversy between the parties.” 9 U.S.C. § 4 (“§ 4”). Thus,
the FAA “bestows no federal jurisdiction but rather requires for access to a federal forum an
independent jurisdictional basis over the parties’ dispute.” Vaden v. Discover Bank, 556 U.S. at
59 (internal quotation and alteration omitted).
B. Jurisdiction – Article III Standing
Because Respondent challenges this Court’s jurisdiction, the Court must accept as true all
material allegations of the Petition in favor of the Petitioners. Kerns v. United States, 585 F.3d
187, 192 (4th Cir. 2009) (citation omitted); accord Raines v. Byrd, 521 U.S. 811, 818
(1997) (“One element of the case-or-controversy requirement is that appellees, based on their
complaint, must establish that they have standing to sue.” (emphasis added)). See Republic Bank
& Trust Co. v. Kucan, 245 F. App’x 308, 311 (4th Cir. 2007) (citing Pennell v. City of San Jose,
485 U.S. 1, 7 (1988)). Petitioners bear the burden of establishing standing, as they are “the party
seeking to invoke federal jurisdiction.” Friends for Ferrell Parkway, 282 F.3d at 320 (citing
Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992)). Whether Petitioners have standing is
determined by considering the relevant facts as they existed at the time the action was
commenced. See Friends of the Earth, Inc. v. Laidlaw Envtl. Servs., 528 U.S. 167, 180 (2000)
(“[W]e have an obligation to assure ourselves that [the plaintiff] had Article III standing at the
outset of the litigation.”).
Article III standing “is designed to guarantee that the [petitioner] has a sufficient personal
stake in the outcome of a dispute to render judicial resolution of it appropriate.” Emery v.
Roanoke City Sch. Bd., 432 F.3d 294, 298 (4th Cir. 2005) (internal quotation marks omitted). To
satisfy the constitutional standing requirement, a petitioner must aver: “(1) an injury in fact, (2)
that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be
redressed by a favorable judicial decision.” Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1547 (2016),
as revised (May 24, 2016) (citing Lujan, 504 U.S. at 560–61).
Respondent’s primary contention is that neither Arctic Glacier U.S.A. nor the Plan are
signatories to the Agreement, and thus cannot be considered “parties” to it. Respondent further
contends that neither Arctic Glacier U.S.A nor the Plan are parties to the Agreement because
they likewise did not execute a written assignment under the Agreement. As a result, Respondent
argues, Petitioners lack standing because they have suffered no “invasion of a legally protected
interest,” that arises from the contract which they wish to enforce. Lujan, 504 U.S. at 560, The
Court disagrees and finds both the Plan and Arctic Glacier U.S.A. have sufficiently pled an
injury in fact.
In Lujan, the United States Supreme Court framed the central standing inquiry as whether
the legally protected interest was “cognizable” and whether plaintiffs were “among the
injured” Id. at 562–63; see also Bennett v. Spear, 520 U.S. 154, 167 (1997) (omitting “legally
protected interest” altogether, replacing it with “judicially cognizable interest” in defining injuryin-fact); Parker v. District of Columbia, 478 F.3d 370, 377 (D.C. Cir. 2007) (“[W]hen the
Supreme Court used the phrase ‘legally protected interest’ as an element of injury-in-fact, it
made clear it was referring only to a ‘cognizable interest.’”), aff’d sub nom. District of Columbia
v. Heller, 554 U.S. 570 (2008). The “legally protected interest” requirement refers to an injury
“deserving of legal protection through the judicial process.” Sierra Club v. Morton, 405 U.S.
727, 734–35 (1972), cited with approval in Lujan, 504 U.S. at 561; see also ABF Freight Sys.,
Inc. v. Int'l Bhd. of Teamsters, 645 F.3d 954, 959 (8th Cir. 2011) (“legally protected interest”
requires only a “judicially cognizable interest.”).
When considering the Petition as a whole, this Court cannot agree that a mere failure to
obtain signatures on an assignment of the Agreement destroys standing. “While a contract cannot
bind parties to arbitrate disputes they have not agreed to arbitrate, ‘[i]t does not follow ... that
under the [Federal Arbitration] Act an obligation to arbitrate attaches only to one who has
personally signed the written arbitration provision.’” Int’l Paper Co. v. Schwabedissen
Maschinen & Anlagen GMBH, 206 F.3d 411, 417 (4th Cir. 2000) (quoting Fisser v.
International Bank, 282 F.2d 231, 233 (2d Cir. 1960)). This is because “a party can agree to
submit to arbitration by means other than personally signing a contract containing an arbitration
clause.” Id. Theories “arising out of common law principles of contract and agency law” can
provide a basis for binding non-signatories to arbitration agreements, including: “incorporation
by reference” and “assumption.” Id. (citing Thomson–CSF v. Am. Arbitration Ass’n, 64 F.3d 773,
776 (2d Cir. 1995)).
Here, the Petition and its incorporated exhibits demonstrate that Article Glacier U.S.A.
and the Plan maintain a legally sufficient interest as the assigned party to the Agreement and the
third-party beneficiary, respectively. The Petition reflects that, as of 2012, Respondent provided
“services to the plan sponsor” Arctic Glacier U.S.A. and to the Plan for the benefit of Arctic
Glacier U.S.A. employees. See Petition, ECF No. 1 at 2; Service Agreement, ECF No. 1-1 at 2,
8. As of July 2012, the Plan name was amended from Article Glacier International Inc. to Arctic
Glacier U.S.A., Inc., see Petition, ECF No. 1 at 2; Cover Letter and Amendment, ECF No. 1-6 at
58–6, and the amendment to change the Plan name was signed by both Respondent and
“Trustees for Arctic Glacier U.S.A., Inc. Savings and Retirement Plan.” See ECF No. 1-6 at 59.
The Plan amendments were all notably identified as part of the Plan at issue in this case, “Group
Contract No. GA 4-44349.” Id. Thereafter, Arctic Glacier U.S.A. provided Respondent with the
list of Plan participants—the Arctic Glacier U.S.A. employees, who Respondent ultimately sent
the belated January 2014 Notices regarding the Plan change. See ECF No. 1 at 6; ECF No. 1-4 at
5. The Petition further includes, at Attachment 2 of Exhibit 6, Respondent’s IRS substitution
reflecting Arctic Glacier U.S.A. as the new employer of the Plan representative and its
employees as Plan participants. See Principal Financial Group Prototype for Savings Plans, ECF
No. 1-6 at 12. Accordingly, for Article III standing purposes, the Petition and incorporated
exhibits reflect that Arctic Glacier U.S.A. was substituted as the Plan Representative and the
Agreement was for the benefit of the Arctic Glacier U.S.A. Plan participants.
In this regard, the Court finds persuasive the Second Circuit Court of Appeals analysis in
Cent. States Se. & Sw. Areas Health & Welfare Fund v. Merck-Medco Managed Care, L.L.C.,
504 F.3d 229 (2d Cir. 2007). Initially, that case turned on whether the certified representative
Plaintiffs had constitutional standing to assert ERISA claims that purportedly arose from an
agreement between a plan and a plan administrator. See Cent. States Se. & Sw. Areas Health &
Welfare Fund v. Merck-Medco Managed Care, L.L.C., 433 F.3d 181, 200 (2d Cir. 2005).
Important to the analysis here, the plaintiff’s class appeared to include a named plan trustee who
had “failed to produce evidence of a relationship between her Plan and [defendant]
Medco.” Merck-Medco, 433 F.3d at 200. Because the District Court failed to address standing,
the Court of Appeals remanded for further findings as to standing before reaching the merits.
On appeal after remand, the Second Circuit affirmed the District Court’s determination
that the Plan trustee in question had constitutional standing even though the specific Plan
agreement was “signed by only one party.” Merck-Medco, 504 F.3d at 242. The agreement, the
Court held, “still ha[s] evidentiary value of both an intent to execute the [a]greement, and
progress toward such execution.” Id. (second alteration in original) (internal quotation marks
omitted). Accordingly, standing was conferred by virtue of the Plaintiff’s involvement in a
contractual relationship to provide benefits under ERISA.
Likewise here, the Petition and its incorporated exhibits demonstrate that the Petitioners
had a similar contractual relationship with Respondent sufficient to confer standing. Petitioners
assumed the obligations and received the benefits under the Agreement. Petitioners likewise
were the alleged parties injured by Respondent’s failure to provide timely notice of the change in
benefits. Perhaps most tellingly, Respondent at oral argument admitted that it submitted the Plan
changes to the IRS reflecting the Petitioners as Trustee and participants respectively. Respondent
also could not meaningfully dispute that Arctic Glacier U.S.A. has been the Plan representative
since July 2012 for the benefit of Arctic Glacier U.S.A employees. See also ABF Freight Sys.,
Inc. v. Int’l Bhd. of Teamsters, 645 F.3d 954, 960 (8th Cir. 2011) (finding an agreement with a
third-party as sufficient evidence of rights under a collective bargaining agreement administered
by that third-party); Novartis Seeds, Inc. v. Monsanto Co., 190 F.3d 868, 872 (8th Cir. 1999)
(declining to rule on the merits of a proper assignment of a contract, but deciding the plaintiff
had contractual rights to bring suit); cf. Republic Bank & Trust Co. v. Kucan, 245 F. App’x 308,
311 (4th Cir. 2007) (relying on the allegations in the petition in reversing dismissal for lack of
standing of a bank petitioner who sought to compel arbitration). Accordingly, because the
Petition demonstrates that Petitioners have effectively stepped into the shoes of the predecessor
Plan representatives and participants, they maintain standing to proceed with the Petition. See
Int'l Paper Co. v. Schwabedissen Maschinen & Anlagen GMBH, 206 F.3d 411, 418 (4th Cir.
2000) (holding non-signatory to agreement with arbitration clause binding on successor
A final word on the implication of the Court’s standing analysis: simply because
Petitioners carried their standing burden at this stage does not mean they have demonstrated their
rights to enforce the arbitration provision under the Agreement. “[T]he distinction between
[merits questions] . . . and subject-matter jurisdiction is a vital one.” Novartis Seeds, 190 F.3d at
871; accord Braden, 588 F.3d at 591. “It is crucial . . . not to conflate Article III's requirement of
injury in fact with a plaintiff's potential causes of action, for the concepts are not coextensive.”
Braden, 588 F.3d at 591 (citing Ass’n of Data Processing Serv. Orgs. v. Camp, 397 U.S. 150,
152–54 (1970)); accord Cooksey v. Futrell, 721 F.3d 226, 239 (4th Cir. 2013) (In
evaluating standing, “the court must be careful not to decide the question on the merits for or
against the plaintiff, and must therefore assume that on the merits the plaintiffs would be
successful in their claims.” (quoting City of Waukesha v. EPA, 320 F.3d 228, 235 (D.C. Cir.
2003)); Lloyd v. HOVENSA, LLC, 369 F.3d 263, 272 (3d Cir. 2004) (“The issues that [the
appellant] seeks to raise before us relate only to whether [the appellee] has or does not have a
contract-based defense requiring arbitration rather than litigation of those claims. That issue is
not a jurisdictional one.”). Whether Petitioners are an “aggrieved party” under § 4 of the FAA
warranting an order to compel arbitration is for the court determining the merits of the Petition to
C. Diversity Jurisdiction
Respondent’s pleadings also raise, although somewhat confusingly, that this Court
generally lacks “subject matter jurisdiction.” See ECF No. 7-1 at 3. Although Respondent at the
motions hearing orally confirmed that it was not challenging jurisdiction beyond the question of
standing, the Court will nonetheless complete the jurisdictional inquiry out of an abundance of
caution. See Brickwood Contractors, Inc. v. Datanet Eng’g, Inc., 369 F.3d 385, 390 (4th Cir.
2004) (en banc) (“Subject-matter jurisdiction . . . may (or, more precisely, must) be raised sua
sponte by the court.” (citation omitted)).
A petition to compel arbitration may be filed in federal court only if subject matter
jurisdiction (federal question, admiralty, or diversity) otherwise exists with regard to the
underlying controversy. See Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1,
25 n.32 (1983); Discover Bank v. Vaden, 396 F.3d 366, 373 (4th Cir. 2005). Diversity
jurisdiction exists when there is complete diversity of citizenship between the parties and the
amount in controversy exceeds $75,000. See 28 U.S.C. § 1332(a).
Petitioners have sufficiently alleged diversity jurisdiction here. Respondent is deemed a
citizen of Iowa, the Plan citizenship is based on those of its trustees who reside in California and
New Jersey, and Arctic Glacier U.S.A. is deemed a citizen of Delaware and Minnesota. See
Petition, ECF No. 1 at 1–3. Additionally, the jurisdictional amount is satisfied in this case as the
amount-in-controversy is over $75,000 looking only to the fee provided to Respondent for the
purportedly breached Agreement. See Service Agreement, ECF No. 1-1 at 36 (fee of $86,535);
Republic Bank & Trust Co. v. Kucan, 245 F. App’x 308, 314 (4th Cir. 2007) (“When
determining whether the jurisdictional amount is satisfied in a case involving a petition to
compel arbitration, it is appropriate to look through the petition to compel to the controversy
underlying the arbitration request.”) (citing Delta Fin. Corp. v. Paul D. Comanduras &
Assocs., 973 F.2d 301, 304 (4th Cir. 1992)). Thus, the Court maintains diversity jurisdiction. 4
This Court’s Authority to Compel Arbitration & Proper Venue
Although the FAA authorizes the Court to compel arbitration, it prescribes that “[t]he
[arbitration] hearing and proceedings, under such agreement, shall be within the district in which
the petition for an order directing such arbitration is filed.” 9 U.S.C. § 4. Respondent argues that
the Court should dismiss the Petition because under § 4, only a Nebraska court can order
arbitration to take place in Nebraska. See ECF No. 7-1 at 5 (citing Service Agreement, ECF No.
In passing, Respondent provides in its statement of facts that “Petitioners do not allege that they pursued
the dispute resolution procedures by invoking the mediation procedure that is the second step of the
preconditions to arbitration under the parties’ agreement.” ECF No. 7-1 at 2. To the extent Respondent
contends the Court lacks jurisdiction over the Petition because the pre-conditions to arbitration (such as
negotiation and mediation) have not been met, this issue does not disturb the Court’s jurisdiction because
this issue of pre-conditions is properly resolved by the arbitrator. See Chorley Enterprises, Inc. v.
Dickey’s Barbecue Restaurants, Inc., 807 F.3d 553, 565 (4th Cir. 2015) (finding that “arbitrators—not
courts—must decide whether a condition precedent to arbitrability has been fulfilled”).
1-1 at 2, 11 (the parties will arbitrate “in the capital city of the State” and the “State” was
previously defined as Nebraska where the Agreement was executed)). Petitioner counters that
Respondent has waived any venue arguments because its response to the petition was untimely
filed. Neither party is wholly correct.
Turning first to Petitioners’ waiver argument, the crux of Petitioners contention is that
Respondent filed its motion to dismiss under Rule 12 of the Federal Rules of Civil Procedure
after the 21 days provided to file its responsive pleadings to a complaint. See ECF No. 9 at 5. In
this regard, Petitioners construe the Petition as a complaint and rely on the companion waiver
analysis pertaining to complaints. See ECF No. 9 at 9 (citing Md. Elec. Indus. Health Fund v.
Valley Sun Indus. Grp., 310 F.R.D. 273, 273 (D. Md. 2015); Hoffman v. Blaski, 363 U.S. 335,
343 (1960); Farmers Elevator Mut. Ins. Co. v. Carl J. Austad & Sons, Inc., 343 F.2d 7, 12 (8th
Cir. 1965)). Petitioners’ theory of waiver is inapt.
Section 6 of the FAA mandates that the Court treat petitions as motions, not complaints.
See 9 U.S.C. § 6 (“Any application to the court hereunder shall be made and heard in the manner
provided by law for the making and hearing of motions, except as otherwise herein expressly
provided.”); see also Liberty Mut. Grp., Inc. v. Wright, No. DKC 12-0282, 2012 WL 718857, at
*7 (D. Md. Mar. 5, 2012) (striking answer and counterclaim to a petition pursuant to § 6 of the
FAA because “[a]pplications filed pursuant to § 6 are, therefore ‘motions . . . rather than
complaint[s] initiating . . . plenary action.’” (quoting D.H. Blair & Co. v. Gottdiener, 462 F.3d
95, 108 (2d Cir. 2006))). Accordingly, petitions are not treated as “actions” that require
responsive “pleadings.” See ISC Holding AG v. Nobel Biocare Fin. AG, 688 F.3d 98, 112 (2d
Cir. 2012) (“[Respondent] could not have filed an answer here, any more than [Petitioner] could
have filed a complaint.”). In this way, it is of little persuasive value that Respondent failed to
argue improper venue in the time allotted to answer a complaint when the pleading before this
Court is not a complaint at all. The Court therefore finds that Respondent’s venue challenge is
That said, the Court disagrees that venue is proper in this district in light of the forum
selection clause contained within the Agreement. Where, as here, the petition to compel
arbitration is filed in a district other than the agreed upon forum for arbitration, courts have taken
three different approaches to determining the proper venue to adjudicate the petition. Am. Int’l
Specialty Lines Ins. Co. v. A.T. Massey Coal Co., Inc., 628 F. Supp. 2d 674, 683 (E.D. Va. 2009).
The first approach is that the Court in which the petition is filed may order directly arbitration to
take place in the place specified in the arbitration agreement, even if different than the district in
which the Petition is filed. Dupuy–Buschinq Gen. Agency, Inc. v. Ambassador Ins. Co., 524 F.2d
1275, 1276, 1278 (5th Cir. 1975) (recognizing a Mississippi district court's order directing
parties to proceed with arbitration in New Jersey where the plaintiff sought to avoid arbitration
by bringing suit in Mississippi, rather than in the contract forum of New Jersey). A second
approach permits a district court to compel arbitration in its own district regardless of the forum
specified in the arbitration clause. See Textile Unlimited, Inc. v. A.BMH & Co., 240 F.3d 781,
783 (9th Cir. 2001) (where the court held that the FAA “does not require venue in the
contractually-designated locale.”); accord Indian Harbor Ins. Co. v. Global Transp. Sys.,
Inc., 197 F. Supp. 2d 1 (S.D.N.Y. 2002). The third approach, taken by a majority of courts,
reasons that because § 4 of the FAA confers authority to order arbitration only to the district
court located in the same forum chosen for arbitration, the petition must either be dismissed or
transferred to the forum court. See, e.g., Ansari v. Qwest Communs. Corp., 414 F.3d 1214, 1220–
21 (10th Cir. 2005); Inland Bulk Transfer Co. v. Cummins Engine Co., 332 F.3d 1007, 1018 (6th
Cir. 2003); Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Lauer, 49 F.3d 323, 327 (7th Cir.
Although the Fourth Circuit Court of Appeals has not directly resolved this issue, it has
suggested that it would likely follow the majority approach. See Elox Corp. v. Colt Indus., Inc.,
952 F.2d 395 (4th Cir. 1991) (unpublished) (“The [FAA] provides that a district court deciding a
motion to compel arbitration shall defer to the terms of the parties’ agreement. The district court
must, therefore, apply a forum selection clause contained in the agreement if such a clause exists.
Further, if a court orders arbitration, the arbitration must be held in the same district as the
court.”) (internal citations omitted). See also UBS Fin. Servs. Inc. v. Carilion Clinic, 880 F.
Supp. 2d 724, 733 n.6 (E.D. Va. 2012) (citing Am. Int’l Specialty Lines Ins. Co. v. A.T. Massey
Coal Co., Inc., 628 F. Supp. 2d 674, 683 (E.D. Va. 2009).
This Court finds that the most faithful reading of § 4 requires that the Petition be
adjudicated by the court located in the agreed-upon arbitration forum. § 4 provides that a Petition
to compel arbitration may be brought before “any United States Court;” but also mandates that
the arbitration itself, if ordered, “shall be within the district for which the petition for an order
directing the arbitration is filed.” 9 U.S.C. § 4. Where the parties have elected to arbitrate a
matter in a particular forum, and where § 4 directs that arbitration may be compelled only in
forum in which the district court is located, it logically follows that the petition must brought in
the arbitration forum to comport with § 4. To read it otherwise would render “meaningless the §
4 mandate that arbitration and the order compelling arbitration issue from the same district.” Am.
Int’l Specialty Lines Ins. Co. 628 F. Supp. 2d at 683 (quoting Mgmt. Recruiters Int’l Inc. v.
Bloor, 129 F.3d 851, 854 (6th Cir. 1997)). Accordingly, this Court determines that the United
States District Court for the District of Nebraska is the proper forum for the instant Petition.
Respondent alternatively argues that if venue is not proper, the Petition must be
dismissed. The decision to transfer or dismiss the Petition is left to the Court’s discretion. See,
e.g., Cont’l Cas. Co. v. Am. Nat'l Ins. Co., 417 F.3d 727, 733 (7th Cir. 2005) (dismissing the case
after finding venue to be improper); Bank of Commerce & Trust Co. v. Aichholz, 2003 WL
22738540, at *4 (D. Kan. Nov. 18, 2003) (transferring the dispute over arbitration after
determining that venue was improper). Pursuant to 28 U.S.C. § 1404(a), transfer generally is
appropriate “[f]or the convenience of parties and witnesses, in the interest of justice.” But where
“the venue [is] mandated by a choice of forum clause” in the arbitration agreement, it “rarely
will be outweighed by other 1404(a) factors.” Braman v. Quizno’s Franchise Co., LLC, 2008
WL 611607, at *6 (N.D. Ohio Feb. 20, 2008).
Indeed, the parties agreed that arbitration would take place in Nebraska and so are hard
pressed to claim the same forum is “inconvenient” now that a potentially arbitrable dispute has
arisen. Cf. Atl. Marine Const. Co. v. U.S. Dist. Court for W. Dist. of Texas, 134 S. Ct. 568, 582
(2013) (venue provision in contract constitutes parties “effectively exercising a ‘venue privilege’
before a dispute arises.” (internal quotation marks in original)). Transfer also is in the interests of
justice because it gives full effect to the forum clause of the Agreement. See Braman v. Quizno’s
Franchise Co., LLC, 2008 WL 611607, at *6 (N.D. Ohio Feb. 20, 2008) (“[I]f the forum
selection clause is mandatory, then, the interest of justice would weigh toward transfer.”).
Accordingly, this Court will transfer this matter to the United States District Court for the
District of Nebraska.
This Court finds that Petitioners maintain constitutional standing to bring this Petition
and diversity jurisdiction is proper. In light of the parties’ agreement to arbitrate disputes in
Nebraska, this Court transfers the Petition to Compel Arbitration to the United States District
Court for the District of Nebraska for all future proceedings. A separate order shall follow.
United States District Judge
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?