Textile Unlimited v. A Bmhand Co.

• Decision Date: 14 February 2001
• Docket Number: No. 00-56358,00-56358
• Parties: (9th Cir. 2001) TEXTILE UNLIMITED, INC., a California corporation, Plaintiff-Appellee, v. A..BMHAND COMPANY, INC., a Georgia corporation, Defendant-Appellant
• Court: U.S. Court of Appeals — Ninth Circuit

Page 781

240 F.3d 781 (9th Cir. 2001)

TEXTILE UNLIMITED, INC., a California corporation, Plaintiff-Appellee, v. A..BMHAND COMPANY, INC., a Georgia corporation, Defendant-Appellant.

No. 00-56358

UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

Argued and Submitted January 10, 2001

Filed February 14, 2001

[Copyrighted Material Omitted]

COUNSEL: Mark M. Kassabian and Jacqueline Bruce Chinery; Jones, Day, Reavis & Pogue; Los Angeles, California, for the defendant-appellant.

William H. Y. Park, Michael Chillaci, Jeffrey T. Lowe; Kwak, Kim & Park; Los Angeles, California, for the plaintiff appellee.

Appeal from the United States District Court for the Central District of California Lourdes G. Baird, District Judge, Presiding. D.C. No.CV-00-03824-LGB

Before: Stephen S. Trott, Sidney R. Thomas and Marsha S. Berzon, Circuit Judges.

OPINION

THOMAS, Circuit Judge:

In this appeal, we consider, inter alia, the proper venue for a suit to enjoin an arbitration. Under the circumstances presented by this case, we conclude that the Federal Arbitration Act does not require venue in the contractually-designated arbitration locale.

I

Textile Unlimited, Inc. ("Textile") claims that A..BMH and Company, Inc. ("A..BMH") is, in the parlance of the industry, spinning a yarn by contending that the two companies had agreed to settle contract disputes by binding arbitration in Georgia. A..BMH counters that Textile is warping the facts.

Over the course of ten months of this tangled affair, Textile bought goods from A..BMH in approximately thirty-eight transactions. Each followed a similar pattern. Textile would send a purchase order to a broker in California containing the date, item number, item description, quantity ordered, and price. A..BMH would respond with an invoice, followed by shipment of the yarn and an order acknowledgment. Both the invoice and the order acknowledgment contained a twist: additional terms tucked into the back of the invoice and the face of the acknowledgment, terms that had not adorned Textile's purchase order. Specifically, the A..BMH documents provided:

Terms. All sales of yarn by A..BMH & Co., Inc. ("Seller") are governed by the terms and conditions below. Seller's willingness to sell yarn to you is con ditioned on your acceptance of these Terms of Sale. If you do not accept these terms, you must notify Seller in writing within 24 hours of receiving Sell er's Order Confirmation. If you accept delivery of Seller's yarn, you will be deemed to have accepted these Terms of Sale in full. You expressly agree that these Terms of Sale supersede any different terms and conditions contained in your purchase order or in any other agreement.

. . .

Arbitration. All disputes arising in connection with this agreement shall be settled in Atlanta, Georgia by binding arbitration conducted under the Commercial Arbitration Rules of the American Arbitration Association. The arbitrator will not be permitted to award punitive damages with respect to any dispute. Judgment upon the award rendered may be entered, and enforcement sought, in any court having jurisdiction. The total costs of arbitration, including attorneys' fees, will be paid by the losing party. Governing Law and Venue. This transaction shall be governed by and construed in accordance with the laws of the State of Georgia. If any court action is brought to enforce the provisions of this agreement, venue shall lie exclusively in the Superior Court of Fulton County, Georgia. You expressly consent to personal jurisdiction in the Superior Court of Fulton County, Georgia, and waive the right to bring action in any other state or federal court.

Textile did not request any alterations. However, after receiving a shipment in September 1998, Textile refused to pay, alleging that the yarn was defective. A..BMH submitted the matter to arbitration in Atlanta, Georgia. The American Arbitration Association ("AAA") notified both parties on January 10, 2000, that it had received the arbitration request. Textile did not object to the arbitration within the time provided by AAA rules. Textile eventually protested, contending that the arbitration clause had not been woven into the contract. Textile also argued that the objection period should have been lengthened because the initial notice had been sent to an attorney no longer with its law firm. Textile reserved the right to challenge the jurisdiction of the AAA, and indicated that nothing in the letter should be deemed a waiver.

With arbitration looming, Textile filed an action on April 10, 2000 in the United States District Court for the Central District of California to enjoin the arbitration. Unruffled, the AAA Arbitrator found on May 5, 2000 that the case was arbitrable. On June 26, 2000, Textile moved for a stay of the arbitration pending in Georgia. On July 17, 2000, the district court preliminarily enjoined both the pending arbitration and A..BMH from any further action regarding arbitration of the dispute in question. A..BMH timely appealed the district court's order.

II

The district court correctly concluded that venue was proper in the Central District of California under 28 U.S.C. S 1391. Contrary to A..BMH's arguments, nothing in the Federal Arbitration Act ("FAA" or "the Act"), 9 U.S.C. S 1 et seq., requires that Textile's action to enjoin arbitration be brought in the district where the contract designated the arbitration to occur.

As the Supreme Court has recently explained, the FAA's venue provisions are discretionary, not mandatory. Cortez Byrd Chips, Inc. v. Bill Harbert Constr. Co. , 529 U.S. 193, 194-96, 120 S. Ct. 1331, 1334 (2000). Congress enacted the FAA in 1925 against the tapestry of a restrictive general venue statute, with the intent of liberalizing venue choice. Id. at 1336-37. Thus, the venue provisions of the FAA do not supplant the general venue provisions of 28 U.S.C.S 1391(a); rather, they are permissive and supplement those sections. Id.

Of course, the Supreme Court was considering a slightly different question than the one at hand, namely, an action to vacate or modify an arbitration award under 9 U.S.C.SS 9-11. However, the Court's analysis pertained to the FAA as a whole, and its logic is equally applicable here. 120 S. Ct. at 1336, 1339. Indeed, Cortez Byrd Chips instructs us to weave the various venue strands of the Act together into a seamless fabric which does not clash with other federal venue statutes. Id. at 1336-37. Such an analysis can only lead to a more elastic and complimentary construction of venues available under the FAA, including those founded on 28 U.S.C. S 1391 alone.

A plain reading of the section involved in this case, 9 U.S.C. S 4, supports this conclusion. It provides, inter alia, that a

party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration may petition any United States district court which, save for such agreement, would have jurisdiction under Title 28 . . . for an order directing that such arbitration proceed in the manner provided for in such agreement . . . . The court shall hear the parties, and upon being satisfied that the making of the agreement for arbitration or the failure to comply therewith is not in issue, the court shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement. The hearing and proceedings, under such agreement, shall be within the district in which the petition for an order directing such arbitration is filed. If the making of the arbitration agreement or the failure, neglect, or refusal to perform the same be in issue, the court shall proceed summarily to the trial thereof . . . . If the jury find that no agreement in writing for arbitration was made or that there is no default in proceeding thereunder, the proceeding shall be dismissed. If the jury find that an agreement for arbitration was made in writing and that there is a default in proceeding thereunder, the court shall make an order summarily directing the parties to proceed with the arbitration in accordance with the terms thereof.

9 U.S.C.A. S 4 (1999).

First, on its face, S 4 provides that venue is proper for an action to compel arbitration in "any United States district court which, save for such agreement, would have jurisdiction under Title 28." That clear expression should end the argument. However, A..BMH asserts that venue any place other than the place of arbitration contractually specified is precluded by the S 4 provision that "[t]he hearing and proceedings, under such agreement, shall be within the district in which the petition for an order directing such arbitration is filed." However, this interpretation skirts the section's plain language: by its terms, S 4 only confines the arbitration to the district in which the petition to compel is filed. It does not require that the petition be filed where the contract specified that arbitration should occur. See Continental Grain Co. v. Dant & Russell, 118 F.2d 967, 969 (9th Cir. 1941).

Second, the language of the venue provision of S 4 is less restrictive than that of the provisions the Court found permissive in Cortez Byrd Chips. For example, when filing an action to confirm an arbitration award, 9 U.S.C. S 9 provides that if no venue is specified in the contract "such application may be made to the United States court in and for the district within which such award was made." Section 10(a), which governs motions to vacate arbitration awards, provides that "the United States Court in and for the district wherein the award was made may make an order vacating the award." As to modifications or corrections of arbitration awards, 9 U.S.C. S 11 provides that "the United States Court in and for the district wherein the award was made may make an order modifying or correcting the award upon the application of any partyto the arbitration." In contrast, S 4 allows parties to...