Blount Boats, Inc. v. Wendella Sightseeing Company, Inc.

Filing 16

MEMORANDUM AND ORDER granting (7) Motion to Dismiss for Lack of Jurisdiction; finding as moot (12) Motion to Stay in case 1:17-cv-00368-WES-LDA; granting (7) Motion to Remand to State Court (Certified copy of order sent to the Clerk of Court for the state court in accordance with 28 U.S.C. 1447(c)) ; finding as moot (8) Motion to Vacate ; finding as moot (13) Motion to Stay in case 1:17-cv-00388-WES-LDA. So Ordered by Chief Judge William E. Smith on 3/30/2018. (Jackson, Ryan)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND
___________________________________
)
WENDELLA SIGHTSEEING CO., INC.,
)
)
Plaintiff,
)
C.A. No. 17-388 WES
)
v.
)
)
BLOUNT BOATS, INC.,
)
)
Defendant.
)
___________________________________)
)
BLOUNT BOATS, INC.,
)
)
Plaintiff,
)
C.A. No. 17-368 WES
)
v.
)
)
WENDELLA SIGHTSEEING CO., INC.,
)
)
Defendant.
)
___________________________________)
MEMORANDUM AND ORDER
WILLIAM E. SMITH, Chief Judge.
Before the Court in the first above-captioned case is Wendella
Sightseeing Company, Inc.,’s (“Wendella”) Motion to Remand, asking
that its Miscellaneous Petition to Vacate the Arbitrators’ Award
be sent back to Providence County Superior Court. In the second
above-captioned case, Wendella moves to dismiss on abstention
grounds. Wendella requests that the Court dismiss Blount Boats,
Inc.,’s (“Blount”) Petition to Confirm Arbitral Award, in order to
allow the Superior Court to consider both Wendella’s Petition to
Vacate and Blount’s Petition to Confirm. Blount avers that remand

is improper, but if the Court disagrees, that it should retain
jurisdiction over Blount’s Petition to Confirm. For the reasons
that follow, Wendella’s Motions are GRANTED.
I.

Background
Blount is a Rhode Island company that builds boats. Wendella

is an Illinois company that provides boat tours on the Chicago
River and Lake Michigan. Between 2006 and 2012, Blount built for
and delivered to Wendella three boats, to be used in its tour
business, pursuant to three separate, but similar, construction
contracts. Over time each of these boats – the M/V Wendella, M/V
Linnea, and M/V Lila – proved defective, at least in Wendella’s
estimation. For example, the M/V Wendella allegedly jettisoned its
rudder, and the M/V Linnea and M/V Lila were allegedly constructed
of shoddy steel. When Wendella drove the M/V Lila into a dock, the
Coast Guard’s post-allision inspection of the boat noted sundry
construction defects.
In 2013, Wendella sued Blount in this Court. After Blount
moved to compel arbitration pursuant to provisions in each of the
three construction contracts, Wendella voluntarily dismissed its
suit

and

submitted

the

dispute

to

the

American

Arbitration

Association.
Wendella’s First Amended Statement of Claim (“FASC”) included
three counts. The first, for fraudulent inducement, alleged that
Blount

made

a

representation

that
2

the

M/V

Lila

would

be

substantially similar (i.e., a sister ship) to the M/V Wendella –
and that this persuaded Wendella to enter the contract for the M/V
Lila – when, in fact, Blount intentionally manufactured the M/V
Lila using inferior materials. The second count alleged that Blount
breached each of the three construction contracts by failing to
manufacture the boats according to agreed-to specifications. The
third and final count was for breach of the contracts’ express
warranties, and relied on the same alleged manufacturing defects.
Although the arbitration panel found for Wendella on certain
of

its

claims,

it

awarded

Blount

$807,595.19.

Unsatisfied,

Wendella filed a Petition to Vacate the arbitration award in
Providence County Superior Court pursuant to section 10-3-12 of
the Rhode Island Arbitration Act (“RIAA”). Four days later, Blount
filed a Petition to Confirm the award in this Court, and removed
Wendella’s Petition to Vacate.
The fight now is over whether Wendella’s Petition should be
remanded, and if so, whether wise judicial administration weighs
in favor of deferring all post-arbitral proceedings to state court.
II.

Discussion
In support of its Motion to Remand, Wendella argues this Court

has neither federal question nor admiralty jurisdiction over this
case. It also contends that, even though the parties are diverse,
Blount cannot remove as the in-forum party. If Wendella’s case is

3

remanded, it urges the Court to abstain from hearing Blount’s
Petition to Confirm.
Blount, on the other hand, says that removal is appropriate
here

because

the

Court

has

federal

question

and

admiralty

jurisdiction, and in any event, Wendella waived its objection to
diversity jurisdiction when it moved this Court to vacate the
arbitration award. If remand is in the cards, Blount argues its
Petition to Confirm should nevertheless remain in this Court.
A.

Remand

There is no federal question jurisdiction over Wendella’s
Petition

to

jurisdiction

Vacate.
over

Federal
“all

district

civil

courts

actions

are

vested

with

arising

under

the

Constitution, laws, or treaties of the United States.” 28 U.S.C.
§ 1331. The well-pleaded complaint rule dictates that a suit
“arises under” federal law “when the plaintiff's statement of his
own cause of action shows that it is based upon [federal law].”
Louisville & Nashville R.R. Co. v. Mottley, 211 U.S. 149, 152
(1908).

Suits pursuant to the Federal Arbitration Act (“FAA”) –

a federal law, no doubt – do not necessarily fall within federal
jurisdiction. Even though it has generated a “body of federal
substantive law . . . equally binding on state and federal courts,”
the FAA “bestows no federal jurisdiction but rather requires for
access to a federal forum an independent jurisdictional basis over

4

the parties’ dispute.” Vaden v. Discover Bank, 556 U.S. 49, 58-59
(2009) (brackets and quotation marks omitted).
Therefore, Blount must find federal question jurisdiction
someplace other than the FAA. And the First Circuit requires that
this

Court

conduct

its

search

for

jurisdiction

by

“looking-

through” Wendella’s Petition to Vacate to the parties’ underlying
substantive dispute. Ortiz-Espinosa v. BBVA Sec. of P.R., Inc.,
852 F.3d 36, 47 (1st Cir. 2017); accord Doscher v. Sea Port Grp.
Sec., LLC, 832 F.3d 372, 388 (2d Cir. 2016)

(“[A] federal district

court faced with a § 10 petition may ‘look through’ the petition
to the underlying dispute, applying to it the ordinary rules of
federal-question jurisdiction . . . .”). 1

1

The Court applies the FAA to this case – notwithstanding
the fact that Wendella brought its Petition to Vacate under the
RIAA – specifically section 10 which provides the grounds for
vacating an arbitration award. This is because the parties’
contracts involved interstate commerce. See M&L Power Servs., Inc.
v. Am. Networks Int’l, 44 F. Supp. 2d 134, 139-40 (D.R.I. 1999)
(“The [FAA] applies to any transaction involved in interstate
commerce.”); Howard Fields & Assocs. v. Grant Wailea Co., 848 F.
Supp. 890, 893-94 (D. Haw. 1993) (finding transaction involved
interstate commerce where parties were “incorporated in different
states[;] . . . entered into a contract for consultation and
construction administration services[, and] have traveled between
Hawaii and California and can be presumed to have used the mails”).
Moreover, their contracts did not contain language “that the
parties intended that state law would govern vacatur of the
arbitration award.” Ortiz-Espinosa, 852 F.3d at 42 (“[W]here the
FAA applies, it may be displaced by state law (if at all) only if
the parties have so agreed explicitly.”). The contracts’ choiceof-law provisions requiring their terms “be determined under Rhode
Island law” is not specific enough to displace the FAA in favor of
the RIAA. Id. (applying the FAA where parties’ agreement failed to
5

Blount admits that Wendella’s claims in its FASC arise under
state law, but argues that these claims nevertheless support
federal

question

jurisdiction

under

the

“federal

ingredient

doctrine.” One & Ken Valley Hous. Grp. v. Maine State Hous. Auth.,
716 F.3d 218, 224 (1st Cir. 2013). “This doctrine, which remains
vibrant in this circuit but should be applied with caution, permits
removal of a well pleaded claim sounding in state law which
necessarily

requires

resolution

of

a

substantial

question

of

federal law.” Metheny v. Becker, 352 F.3d 458, 460 (1st Cir. 2003)
(citations and quotation marks omitted). In other words, federal
district courts have federal question jurisdiction over disputes
sounding entirely in state law in the “extremely rare,” Gunn v.
Minton, 568 U.S. 251, 257 (2013), instances where the complaint
(or, in this case, the FASC) “reveals a federal issue that is: (1)
necessarily raised, (2) actually disputed, (3) substantial, and
(4) capable of resolution in a federal court without disrupting
the federal-state balance of power.” Municipality of Mayagüez v.
Corporación Para El Desarrollo Del Oeste, Inc., 726 F.3d 8, 13
(1st Cir. 2013) (brackets and quotation marks omitted).

clearly “contemplate[] enforcement under” the [Puerto Rican
Arbitration Act]”); see also Rota–McLarty v. Santander Consumer
USA, Inc., 700 F.3d 690, 697 n.7 (4th Cir. 2012) (“Unquestionably,
a contract's general choice-of-law provision does not displace
federal arbitration law if the contract involves interstate
commerce.”).
6

Blount claims that determining the correct application of 46
U.S.C. § 6308(a) to the parties’ arbitration proceeding is the
substantial federal issue “justify[ing] resort to the experience,
solicitude, and hope of uniformity that a federal forum offers.”
Grable & Sons Metal Prods., Inc. v. Darue Eng’g & Mfg., 545 U.S.
308, 312 (2005). Blount insists that 46 U.S.C. § 6308(a) – which
states, that “no part of a report of marine casualty investigation
. . . shall be admissible . . . in any civil or administrative
proceeding” – defeats the argument made in Wendella’s Motion to
Vacate that the arbitration panel should have considered the Coast
Guard’s report on the Lila allision conclusive evidence of Blount’s
culpability therefor.
Whatever the merits of Blount’s argument, this is not the
type of issue that falls within the federal ingredient doctrine’s
ambit, for at least two reasons. First, a decision on the issue is
unnecessary to review of the claims in Wendella’s FASC. Blount’s
argument is a defensive one; it claims the Motion to Vacate is, at
least in part, based on a premise that violates federal law. While
this may be true, it is not necessary for a court to reach this
argument, because the motion may well be decided on other grounds.
The standard by which courts review arbitration awards under the
FAA is extremely deferential. See 9 U.S.C. § 10(a); Teamsters Local
Union No. 42 v. Supervalu, Inc., 212 F.3d 59, 61 (1st Cir. 2000)
(“Arbitral awards are nearly impervious to judicial oversight.”).
7

So it is just as likely that the Motion to Vacate could be decided
without reference to the federal statute, as with it. See Metheny,
352

F.3d

at

461

(finding

answer

to

question

of

federal

law

unnecessary where its resolution would not preclude affirmance of
zoning board decision afforded considerable deference).
Second,

the

issue

is

not

substantial.

A

substantiality

inquiry in this context “looks . . . to the importance of the issue
to the federal system as a whole.” Gunn, 568 U.S. at 260. “[I]t is
not enough that the federal issue be significant to the particular
parties in the immediate suit . . . .” Id. An issue is important
to the federal system “where the outcome of the claim could turn
on a new interpretation of a federal statute or regulation which
will govern a large number of cases” or “where a claim between two
private parties, though based in state law, directly challenges
the propriety of an action taken by a federal department, agency,
or service.” Mayagüez, 726 F.3d at 14 (quotation marks omitted).
The potential 46 U.S.C. § 6308(a) issue fails to fit the mold:
Blount does not argue that the interpretation of 46 U.S.C. §
6308(a) it proposes here would govern a large number of cases. And
Blount challenges the action of the arbitrators, not the federal
government. See Mayagüez, 726 F.3d at 15 (“HUD’s performance was
never at issue, and hence, unlike in Grable, the outcome in this
case could not call into question thousands of other actions
undertaken by a federal agency.”). Cf. One & Ken, 716 F.3d at 225
8

(holding that federal ingredient jurisdiction exists where, inter
alia, “[1] the dispute . . . turn[s] on the interpretation of a
contract provision approved by a federal agency pursuant to a
federal statutory scheme, [2] the alleged breach occurred only
because the contractor was following the federal agency’s explicit
instructions; [3] the case presents a pure question of law that
will

govern

numerous

cases

nationwide,

[and

4]

the

federal

government has an overwhelming interest in seeing the issue decided
according to a uniform principle” (citations and quotation marks
omitted)). There is no federal ingredient here and therefore no
federal question jurisdiction over Wendella’s Petition to Vacate.
Neither

is

there

admiralty

jurisdiction.

Wendella’s

FASC

contained one count sounding in tort (fraudulent inducement) and
two in contract (breach of the parties’ contracts and their express
warranties). Torts are subject to maritime jurisdiction only when,
inter alia, the “injury occurred on navigable water or that the
injury was caused by a vessel on navigable water.” Florio v. Olson,
129 F.3d 678, 680 (1st Cir. 1997). And under Rhode Island law,
fraudulent inducement occurs when a party is persuaded to act under
false pretenses, see W. Reserve Life Assurance Co. v. Caramadre,
847 F. Supp. 2d 329, 337 (D.R.I. 2012), which happened here, if at
all, when Wendella entered the contract to buy the M/V Lila. See
FASC 15 (“Wendella detrimentally relied on . . . Blount’s false
representation that Blount would build the M/V Lila as a sister
9

ship to the M/V Wendella and the M/V Linnea in entering into the
Lila Contract.”). Without an allegation of fraudulent inducement
on navigable water, this Court lacks admiralty jurisdiction over
Wendella’s tort claim.
Wendella’s contract claims meet the same fate. The parties’
contracts were for the construction and sale of boats. And it is
well settled that while “[c]ontracts to hire a vessel are wholly
maritime . . . contracts to sell a ship are not.” Natasha, Inc. v.
Evita Marine Charters, Inc., 763 F.2d 468, 470 (1st Cir. 1985);
see also 2 Am. Jur. 2d Admiralty § 60 (2018) (“A contract for the
sale

of

a

vessel

is

generally

not

within

a

federal

court’s

admiralty jurisdiction because such a contract is not maritime in
nature.”).
As for diversity jurisdiction, both parties agree that 28
U.S.C. § 1441 would normally bar removal on this basis because
Blount is a Rhode Island citizen. Blount argues, however, that
Wendella waived this procedural hurdle to removal when it filed a
motion to vacate in this Court. See Samaan v. St. Joseph Hosp.,
670 F.3d 21, 28 (1st Cir. 2012). Blount’s argument fails. In its
Motion to Vacate, Wendella explicitly reiterated its position that
the Motion should be decided in state court. Wendella also moved
to stay its Motion to Vacate until the decision on its Motion to
Remand. Cf. id. (finding waiver where plaintiff first raised
citizenship objection after he had “litigated the case for years”
10

in federal district court); Johnson v. Odeco Oil & Gas Co., 864
F.2d 40, 42 (5th Cir. 1989) (affirming decision that plaintiff had
waived citizenship objection to removal where it was first raised
only

after

“considerable

discovery

[had]

take[n]

place

under

federal court auspices for nearly a year”). Thus, Wendella has not
waived the statutory impediment to an in-forum defendant’s removal
in diversity cases.
In light of the foregoing, the Court remands Wendella’s
Petition to Vacate to state court.
B. Abstention
Anticipating this result, Wendella has moved the Court to
abstain from deciding Blount’s Petition to Confirm pursuant to the
abstention doctrine discussed in Colorado River Water Conservation
Dist. v. United States, 424 U.S. 800, 817-20 (1976). That doctrine
allows a federal district court to stay or dismiss a case properly
before it for reasons of “wise judicial administration.” Colorado
River, 424 U.S. at 818. The First Circuit has articulated a list
of factors 2 for a district court to consider when determining

2

These are:

(1) whether either court has assumed jurisdiction over
a res; (2) the geographical inconvenience of the federal
forum; (3) the desirability of avoiding piecemeal
litigation; (4) the order in which the forums obtained
jurisdiction; (5) whether state or federal law controls;
(6) the adequacy of the state forum to protect the
parties’ interests; (7) the vexatious or contrived
11

whether to abstain under Colorado River. Rio Grande, 397 F.3d at
71-72. None is determinative, id. at 72; they are not collectively
exhaustive id. at 71; and “[t]he weight to be given to any one
factor may vary greatly from case to case, depending on the
particular setting of the case,” Moses H. Cone Mem’l Hosp. v.
Mercury Constr. Corp., 460 U.S. 1, 16 (1983).
The

Court

agrees

with

Wendella

that

wise

judicial

administration counsels in favor of abstention in this case. Though
not by much, the state court was first to obtain jurisdiction over
the parties’ dispute regarding the validity of the arbitration
award. Allowing the state court to proceed out of the shadow of a
parallel federal case will avoid piecemeal litigation. Am. Int’l
Underwriters, Inc. v. Cont’l Ins. Co., 843 F.2d 1253, 1258 (9th
Cir. 1988) (“Piecemeal litigation occurs when different tribunals
consider the same issue, thereby duplicating efforts and possibly
reaching different results.”). More important, the state court is
perfectly capable of protecting the parties’ interests. See Vulcan
Chem. Tech., Inc. v. Barker, 297 F.3d 332, 341 (4th Cir. 2002)
(finding that Colorado River “abstention may be granted only when
‘the parallel state-court litigation will be an adequate vehicle

nature of the federal claim; and (8) respect for the
principles underlying removal jurisdiction.
Rio Grande Cmty. Health Ctr., Inc. v. Rullan, 397 F.3d 56, 71-72
(1st Cir. 2005).
12

for the complete and prompt resolution of the issues between the
parties’” (quoting Moses H. Cone, 460 U.S. at 28)). As the Supreme
Court has explained, “state courts . . . are obliged to honor and
enforce agreements to arbitrate,” and are often called upon to do
so as a result of the FAA’s failure to provide parties federal
question jurisdiction. Vaden, 556 U.S. at 71; see also id. at 59
(“Given

the

substantive

supremacy

of

the

FAA,

but

the

Act's

nonjurisdictional cast, state courts have a prominent role to play
as enforcers of agreements to arbitrate.”).
In

addition,

deferring

to

state

court

here

avoids

the

unfortunate situation corrected by the Fourth Circuit in Vulcan.
See 297 F.3d at 340-44. The parties there arbitrated a commercial
dispute, after which the victor moved to confirm the award in state
court, but not before the loser had moved to vacate in federal
court. Id. at 336-37. The two actions proceeded simultaneously and
ultimately resulted in contradiction: the award was confirmed in
state court, but vacated in federal court. Id. at 337. On appeal,
the Fourth Circuit vacated the judgement below, finding that the
district court had abused its discretion by not abstaining under
Colorado River. Id. at 340-44. The court found that a situation in
which one court is deciding whether to vacate an arbitration award
already

confirmed

by

another

constituted

“extraordinary

circumstances” that militated in favor of abstention: “when two
competing parallel actions seek to apply the same law in deciding
13

whether

to

enforce

or

vacate

the

same

arbitration

award,

maintaining a harmonious relationship between the states and the
federal

government

requires

consideration

of

more

complex

principles than mere principles of duality.” Id. at 340-41; accord
Atkinson v. Grindstone Capital, LLC, 12 F. Supp. 3d 156, 162
(D.D.C. 2014) (applying Colorado River abstention where there was
“parallel federal and state court actions dealing with the validity
of an arbitration award”).
Rather than go forward with hope that proceedings in two
separate fora will produce consistent results, the Court – “giving
regard to conservation of judicial resources and comprehensive
disposition of litigation” – elects to abstain. Colorado River,
424 U.S. 817 (quotation marks omitted). Arbitration would soon
lose some of its virtue as a speedy method of dispute resolution
if afterwards still-bickering parties were often caught in a
prisoner’s dilemma resolved suboptimally in the prosecution of
post-award

motions

in

separate

courts.

See

Gilmer

v.

Interstate/Johnson Lane Corp., 500 U.S. 20, 31 (1991) (“[B]y
agreeing

to

opportunity
informality,

arbitrate,
for
and

review

a
of

expedition

party
the
of

omitted)).

14

trades

the

courtroom

for

arbitration.”

procedures
the

and

simplicity,

(quotation

marks

III. Conclusion
For the above reasons, Wendella’s Motion to Remand (C.A. No.
17-388 WES, ECF No. 7) and Motion to Abstain (C.A. No. 17-368 WES,
ECF No. 7) are GRANTED. The first above-captioned case is therefore
remanded, and the second is dismissed. The parties shall conduct
their post-arbitration skirmish in state court.
IT IS SO ORDERED.

William E. Smith
Chief Judge
Date: March 30, 2018

15