Dickey's Barbecue Restaurants, Inc. v. Campbell Investments, LLC et al
Filing
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MEMORANDUM ADOPTING 32 REPORT AND RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE. Respondents' Motion to Dismiss (Dkt. # 13 ) is DENIED. Dickey's Petition to Compel Arbitration (Dkt. # 1 ) is GRANTED IN PART and DENIED IN PART. The pa rties are hereby ORDERED to submit all disputes arising under the Development Agreement to binding arbitration. The Court DENIES any request to compel arbitration arising under other agreements between the parties. As this matter arose under the Petition to Compel (Dkt. # 1 ), no pending matters remain in this case. The Clerk is directed to CLOSE this civil action. Signed by District Judge Amos L. Mazzant, III on 3/15/2019. (rpc, )
United States District Court
EASTERN DISTRICT OF TEXAS
SHERMAN DIVISION
DICKEY’S BARBECUE
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RESTAURANTS, INC.,
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Petitioner,
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v.
§ Case No. 4:18-cv-00491-ALM-KPJ
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CAMPBELL INVESTMENTS, LLC, KEVIN
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CAMPBELL, and KODY CAMPBELL,
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Respondents.
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MEMORANDUM ADOPTING REPORT AND RECOMMENDATION
OF UNITED STATES MAGISTRATE JUDGE
Came on for consideration the Report of the United States Magistrate Judge in this
action, this matter having been referred to the United States Magistrate Judge pursuant to
28 U.S.C. § 636. On February 11, 2019, the Report and Recommendation of the Magistrate
Judge was entered (the “Report”) (see Dkt. #32) recommending: (1) Dickey’s Barbecue
Restaurants, Inc.’s (“Dickey’s”) Petition to Compel Arbitration (Dkt. #1) be granted in part
and denied in part; and (2) Respondents Campbell Investments, LLC (“Campbell
Investments”), Kevin Campbell, and Cody Campbell’s (collectively, “Respondents”) Motion
to Dismiss (Dkt. #13) be denied. See Dkt. #32. The Magistrate Judge recommended the
parties be required to arbitrate Dickey’s claims arising under the parties’ Development
Agreement (Dkt. #2 at 8).
Both parties filed objections to the Report (the “Objections”). See Dkts. #33, #35. The
Court has made a de novo review of the Objections and is of the opinion that the findings and
conclusions of the Magistrate Judge are correct and the Objections are without merit as to the
ultimate findings of the Magistrate Judge.
The Court hereby adopts the findings and
conclusions of the Magistrate Judge as the findings and conclusions of the Court. As such, the
Court hereby refers the parties to arbitration through the FAA pursuant to the terms of the
Development Agreement.
I.
BACKGROUND
As described in the Report, the parties have a long and complex history, spanning
multiple proceedings in multiple courts. See Dkt. #32 at 1–5. Respondents object to the
Report because: (1) the Magistrate Judge found Dickey’s is not collaterally estopped from
litigating the issue of arbitrability under the Development Agreement; and (2) the Magistrate
Judge did not expressly determine which claims in the Petition to Compel fall within the
Development Agreement. See Dkt. #33. Dickey’s objects to the Report because the Magistrate
Judge did not decide two issues: (1) whether the Development Agreement delegated questions
regarding the scope of the arbitration clause to the AAA; and (2) whether all of Dickey’s
affirmative claims relating to the South Jordan Franchise Agreement and prior relationship are
included within the scope of the Development Agreement’s arbitration provision. See Dkt.
#35 at 1.
II.
DISCUSSION
Collateral Estoppel
Respondents argue “the Magistrate Judge erred in finding that [Dickey’s] is not
collaterally estopped from re-litigating the issue of arbitrability[.]” See Dkt. #33 at 1–4. The
doctrine of collateral estoppel applies to prevent issues of ultimate fact from being relitigated
between the same parties in a future lawsuit if those issues have once been determined by a
valid and final judgment. Vines v. Univ. of La. at Monroe, 398 F.3d 700, 705 (5th Cir.), cert.
denied 546 U.S. 1089 (2006) (internal citations omitted). As the Magistrate Judge correctly
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found, collateral estoppel is inapplicable in this case. Even if the factual existence of the
Development Agreement was acknowledged in the Utah Litigation, Respondents present no
evidence that the terms of the Development Agreement were actually litigated. As Judge
Benson noted in the Utah Litigation, “[n]either party has argued that the arbitration provision
in the Development Agreement would apply to [the Campbells’] claims [in Utah.]” See Dkt.
#13-1 at 3 n.1. Moreover, in the Utah Litigation, the court analyzed in detail only the
arbitration provisions in the South Jordan Franchise Agreement and the Ogden Agreement.
See id. at 5. Thus, the issues before the two courts are not “identical.” The agreement before
this Court is a different document than those brought in the Utah Litigation, and specifies that
both litigation and arbitration must occur in Collin County, Texas. Finally, Dickey’s appeal
regarding the arbitrability of the parties’ dispute in the Utah Litigation is still pending before
the Eleventh Circuit and no final judgment has been reached on the merits. As such,
Respondents do not establish that all elements of collateral estoppel are satisfied, as the issues
were neither identical, actually litigated, nor final. Accordingly, this objection is
OVERRULED.
Res Judicata
The Campbells argue that Dickey’s decision not to raise the Development Agreement
in the Utah Litigation precludes Dickey’s from raising the arbitration clause in the
Development Agreement here. See Dkt. 33 at 3. “[R]es Judicata bars recovery when a party
seeks to relitigate the same facts even when the party argues a novel legal theory.” Snow
Ingredients, Inc. v. SnoWizard, Inc., 833 F.3d 512, 521 (5th Cir. 2016). As with collateral
estoppel, res judicata requires a final judgment on the merits and that the same claim or cause
of action was involved in both actions. See id. As previously stated, no final judgment has
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been entered in the Utah Litigation. Further, the Utah Litigation, filed by the Campbells,
asserted claims arising from breach of franchise agreements. Dickey’s responsive filings in
Utah were consistent with the desire to arbitrate franchise agreements; whether arbitration
was required pursuant to disputes arising under the Development Agreement, the issue before
this Court, was not at issue in the Utah Litigation. See Dkt. #13-1 at 3 n.1. While two separate
contracts may give rise to res judicata, it is where the party bringing suit alleges the same
cause of action that the second breach of contract claim is barred. See Agrilectric Power
Partners, Ltd. v. General Elec. Co., 20 F.3d 663, 665 (5th Cir. 1994) (holding that where two
breach of contract claims related to the failure of a single steam turbine were barred, because
they related to: (1) the same accident, (2) alleged the same product deficiency, and (3)
claimed the same damages). The Court finds that the same claim or cause of action was not
involved in both actions. The franchise agreements give rise to different rights and obligations
than the Development Agreement. Accordingly, breach of the Development Agreement is not
equivalent to breach of a franchise agreement.
Further, Respondents do not establish that the Development Agreement necessarily
should have been brought in the Utah Litigation to determine the outcome of the Campbells’
causes of action arising under the parties’ franchise agreement. As Respondents do not
establish what bearing, if any, the arbitration clause of the Development Agreement had on
the franchise agreement between the parties, Respondents do not establish that Dickey’s was
barred by res judicata. This objection is OVERRULED.
Waiver
Respondents object that the Magistrate Judge improperly determined Dickey’s did not
waive its right to arbitration. See Dkt. #33 at 3. Respondents argue that because the
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Development Agreement was not raised in the Utah Litigation, it was barred. See id. While a
party may waive the right to arbitration, see Price v. Drexel Burnham Lambert, Inc., 791 F.2d
1156, 1158 (5th Cir. 1986), “[t]here is a strong presumption against finding a waiver of
arbitration.” In re Mirant Corp., 613 F.3d 584, 591 (5th Cir. 2010). The party opposing
arbitration must demonstrate: (1) the party seeking arbitration substantially invoked the
judicial process; and (2) the party opposing arbitration was prejudiced. In re Mirant, 613 F.3d
at 591. In reviewing the Utah Litigation history, Dickey’s has not engaged in the type of overt
acts that evince the desire to resolve the arbitrable dispute through litigation. See Subway
Equip. Leasing Corp. v. Forte, 169 F.3d 324, 329–29 (5th Cir. 1999); see also Nicholas v.
KBR, Inc., 565 F.3d 904, 910 (5th Cir. 2009) (Prejudice occurs “where a party fails to demand
arbitration and, in the meantime, engages in pretrial activity inconsistent with an intent to
arbitrate[.]”) (internal punctuation omitted). To the contrary, Dickey’s has taken the consistent
position in both cases that the parties’ disputes belong in arbitration. The Court therefore finds
Dickey’s has not waived its right to arbitrate under the Development Agreement and this
objection is OVERRULED.
Scope of Arbitration
Both parties object to the Magistrate Judge’s Report because it does not specify which
claims the AAA should arbitrate. See Dkt. #33 at 4; Dkt. #35 at 5. The Magistrate Judge
recommended only disputes arising under the Development Agreement be referred to
mediation. See Dkt. #32 at 20. The Court agrees.
“The Federal Arbitration Act (‘FAA’) expresses a strong national policy favoring
arbitration of disputes, and all doubts concerning the arbitrability of claims should be resolved
in favor of arbitration.” Wash. Mut. Fin. Grp., LLC v. Bailey, 364 F.3d 260, 263 (5th Cir.
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2004). Here, neither party objects to the Magistrate Judge’s finding that there is a valid
agreement to arbitrate. Rather, both parties focus on whether their dispute falls within the
scope of the arbitration clause in the Development Agreement. See Dkts. #33, #35.
Dickey’s argues that because the arbitration clause in the Development Agreement
“specifically incorporates the AAA’s Commercial Arbitration Rules, the AAA decides any
disputes that are raised regarding the scope of the clause.” See Dkt. #34 at 6. The parties
expressly incorporated the AAA Rules into the Development Agreement. These rules state
that “[t]he arbitrator shall have the power to rule on his or her own jurisdiction, including any
objections with respect to the existence, scope or validity of the arbitration agreement.”
Petrofac, Inc. v. DynMcDermott Petroleum Op. Co., 687 F.3d 671, 675 (5th Cir. 2012)
(quoting AAA Commercial Arbitration Rule R-7(b)). The express adoption of these rules
presents clear and unmistakable evidence that the parties agreed to arbitrate arbitrability. Id.
Respondents’ counter argument, that Dickey’s claims fall outside the Development
Agreement, is unavailing. The arbitration clause in the Development Agreement is broad, and
clearly applies to “all disputes” arising under it. See Dkt. #2 at 30. The Fifth Circuit has
determined that where an arbitration provision contains such broad language, it “embrace[s]
all disputes having a significant relationship to the contract regardless of the label attached to
the dispute.” Hamel-Schwulst v. Country Place Mortg. Ltd., 406 F. App’x 906, 913 (5th Cir.
2010). Thus, determination of the exact scope of the arbitration clause contained in the
Development Agreement is not a question for this Court but is properly decided by the AAA
arbitrator.
The Campbells alternatively request that the Court “make clear that Dickey’s cannot
attempt to arbitrate any claims arising out of the Campbell’s operation of the South Jordan
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Restaurant.” See Dkt. #33 at 6–7. Only the Development Agreement is at issue in this case;
hence, the Court refers only those disputes arising under the Development Agreement to
arbitration. As discussed above, the scope of the arbitration clause in the Development
Agreement is a proper question for the arbitrator. Any claims arising out of the parties’
franchise agreements or the Utah Litigation are beyond the scope of the litigation in this
Court. Accordingly, this objection is OVERRULED.
III.
CONCLUSION
Having received the Report of the United States Magistrate Judge and reviewed the
Objections of the parties, the Court is of the opinion that the findings and conclusions of the
Magistrate Judge regarding these motions are correct and adopts the Magistrate Judge’s report
as the findings and conclusions of the Court. Therefore, Respondents’ Motion to Dismiss
(Dkt. #13) is DENIED. Dickey’s Petition to Compel Arbitration (Dkt. # 1) is GRANTED IN
PART and DENIED IN PART. The parties are hereby ORDERED to submit all disputes
arising under the Development Agreement to binding arbitration. The Court DENIES any
request to compel arbitration arising under other agreements between the parties.
.
As this matter arose under the Petition to Compel (Dkt. #1), no pending matters
remain in this case. All relief not previously granted is hereby DENIED and all costs shall be
borne by the party incurring same. The Clerk is directed to CLOSE this civil action.
IT IS SO ORDERED.
SIGNED this 15th day of March, 2019.
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AMOS L. MAZZANT
UNITED STATES DISTRICT JUDGE
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