16th Street Investments, LLC v. KTJ 216, LLC

Filing 37

MEMORANDUM AND ORDER by Judge William G. Young.(JG)

UNITED STATES DISTRICT COURT
DISTRICT OF NORTH DAKOTA
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Plaintiff,
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v.
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KTJ 216, LLC
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Defendant.
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16TH STREET INVESTMENTS, LLC

CIVIL ACTION
No. 3:17-00174-WGY-ARS

YOUNG, D.J. 1

April 3, 2018
MEMORANDUM AND ORDER

I.

INTRODUCTION
Much has been written about the palpable injustices wrought

by corporations on their customers through mandatory consumer
arbitration.

See e.g. Lauren G. Barnes, How Mandatory

Arbitration Agreements and Class Action Waivers Undermine
Consumer Rights and Why We Need Congress to Act, 9 Harv. L. &
Pol’y Rev. 329 (2015); Michael S. Barr, Mandatory Arbitration in
Consumer Finance and Investor Contracts, 11 N.Y.U. J.L. & Bus.
793 (2015); Emily Canis, One “Like” Away: Mandatory Arbitration
for Consumers, 26 Geo. Mason U. Civ. Rts. L.J. 127 (2015);
Michael Van Derwood, Consumer Arbitration Clauses: An Informal

1

Of the District of Massachusetts, sitting by designation.
See ECF No. 28.

Survey of Their Prevalence in 2014 for an Average American
Consumer, 15 U.C. Davis Bus. L.J. 289 (2015); Jack Downing, An
Important Time for the Future of Class Action Waivers and the
Power Struggle Between Businesses and Consumers, 81 Mo. L. Rev.
1151 (2016); Richard Frankel, “What We Lose in Sales, We Make Up
in Volume”: The Faulty Logic of the Financial Services
Industry’s Response to the Consumer Financial Protection
Bureau’s Proposed Rule Prohibiting Class Action Bans in
Arbitration Clauses, 48 St. Mary’s L.J. 283 (2016).
As distasteful as it may be to dragoon the courts into an
oppressive sophistry that exalts mandatory arbitration into a
tool for slamming the courthouse doors in the faces of those who
most need access to justice, so too courts must be even more
vigilant to guard against the risks that the voluntary choice to
resort to arbitration may become subject to the undue costs and
delays that so plague our court systems.
This case illustrates those risks:
Here, the plaintiff 16th Street Investments, LLC (“16th
Street”) commenced arbitration between itself and the defendant
KTJ 216, LLC (“KTJ”).
at ¶ 4.

Notice of Removal, ECF No. 1, Exhibit 1

A three day arbitration hearing was held from December

12 to December 15, 2016, and the final arbitration award
promptly was issued to both parties on March 31, 2017.
5.

Id. at ¶

16th Street was awarded $1,773,497 plus interest at the rate
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of $231.85 per day accruing on and after April 1, 2017.

Id. at

¶ 6.
“It is well settled that a court must confirm an
arbitration award . . . unless a party has filed a motion with
the court to vacate, modify, or correct the award within 90 days
after delivery of a copy of the award.”
v. Hart, 710 N.W.2d 125, 128 (N.D. 2006).

MBNA America Bank, N.A.
KTJ did not move to

modify, correct, or vacate the final award within the ninety day
appeal period and, on August 7, 2017, 16th Street moved in this
Court (under its diversity jurisdiction) to confirm the
arbitration award as permitted under North Dakota Century Code
(“N.D.C.C.”) § 32-29.3-22. 2
II.

THIRD PARTY COMPLAINT
KTJ responded to 16th Street’s motion to confirm the final

award by initiating a third party complaint, now amended, 3
seeking indemnity, contribution and damages for negligence,
breach of contract, and fraud from non-diverse third-parties

2

“After a party to an arbitration proceeding receives
notice of an award, the party may make a motion to the court for
an order confirming the award at which time the court shall
issue a confirming order unless the award is modified or
corrected pursuant to section 32-29.3-20 or 32-29.3-24 or is
vacated pursuant to section 32-29.3.23.” N.D.C.C. § 32-29.3-22.
3 Parsing the docket, it appears that KTJ has filed two
third party complaints. Def.’s Compl., ECF Nos. 6, 20. KTJ did
not correctly seek leave to amend the third party complaint
under Federal Rule of Civil Procedure Rule 15. Nevertheless,
this Court will address KTJ’s amended complaint, ECF No. 20,
filed against third parties Valley Grading, Nygaard, and RDI.
[3]

Valley Grading, Inc. (“Valley Grading”), Larry Nygaard
(“Nygaard”), and Roers Development, Inc. (“RDI”) (collectively
“third party defendants”) that “caused KTJ to be ‘thrust’” into
arbitration with 16th Street.

Def’s. Am. Compl., ECF 20 at 1-2.

Predictably, this slowed things down until November 15 and
November 21, 2017 when the third party defendants got around to
moving to dismiss.

Defs.’ Mot. Dismiss, ECF Nos. 23, 25.

This

Court heard oral argument on those motions on February 20, 2018
and oral argument on the motion to confirm the final arbitration
award on March 16, 2018.

Minute Entry, ECF Nos. 34-35.

This Court simply does not have supplemental jurisdiction
under 28 U.S.C. § 1367(a) over these non-diverse third party
claims.

For supplemental jurisdiction to be available under 28

U.S.C. § 1367(a), 16th Street’s motion to confirm the final
arbitration award and KTJ’s amended complaint must be so related
that they form part of the same case or controversy.

See Myers

v. Richland County, 429 F.3d 740, 746-48 (8th Cir. 2005).
Claims are part of the same case or controversy if they “derive
from a common nucleus of operative fact.”

City of Chicago v.

Int’l College of Surgeons, 522 U.S. 156, 164-65 (1997) (quoting
United Mine Workers of America v. Gibbs, 383 U.S. 715, 725
(1966)).

At their core, both claims stem from the development

of the Southgate Crossing Shopping Center.
the extent of the factual similarities.
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That, however, is

It cannot fairly be

said that KTJ’s amended complaint is so related to confirmation
of the arbitration award that it forms part of the same case or
controversy.

None of the facts required to hold Valley Grading,

Nygaard, and RDI liable for attorneys’ fees, arbitration costs,
and damages were in any way relevant to the arbitration
proceedings or are helpful in determining whether judicial
confirmation is warranted.

Lacking supplemental jurisdiction,

the Court dismisses KTJ’s amended third party complaint.
III. CONFIRMATION OF THE FINAL ARBITRATION AWARD
Wait, argues KTJ, we never contested our obligation to pay
something under the arbitration award.
Conf. Arb. Award, ECF No. 7 at 1.

Def.’s Opp. Pl.’s Mot.

Indeed, we twice tendered a

substantial partial payment to 16th Street.

Id. at 2.

Surely,

we deserve something for our efforts.
Well, yes and no.

Yes, by not contesting the arbitration

award KTJ deserves to have its arguments analyzed rather than
ignored.

But no, its arguments are without merit.

Here’s why:

KTJ’s first tender of partial payment was just a ploy as it
included language which would have worked an accord and
satisfaction had it been accepted.

Its second tender of partial

payment was nothing more than an offer of compromise.

16th

Street’s non-acceptance does not impair its right to interest
from the date of the award nor the attorneys’ fees expended in
seeking the award’s confirmation.
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Had KTJ been serious about

reducing its obligation to pay interest, it might have made
partial payment into the Court’s registry.

As it is, KTJ has

had the use of these funds for all the long months since the
arbitration award issued.

This is precisely the reason the

award contained an interest obligation in 16th Street’s favor.
IV.

CONCLUSION
For these reasons, after an unwarranted delay of 12 months,

the Court confirms the arbitration award.

Judgment shall enter

for 16th Street, conformable to the award, in the amount of
$1,773,497 with interest at the rate of $231.85 per day from the
date of the award.

16th Street shall submit its application for

attorneys’ fees in securing the award’s confirmation within 30
days of the date of this order and KTJ will have 15 days to
respond.

Additionally, the Court grants Valley Grading,

Nygaard, and RDI’s motions to dismiss KTJ’s amended complaint,
ECF Nos. 23, 25.
SO ORDERED.

/s/ William G. Young
WILLIAM G. YOUNG
DISTRICT JUDGE

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