3M Co. v. Amtex Sec., Inc., No. 07-3519.

• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)
• Writing for the Court: Murphy
• Citation: 542 F.3d 1193
• Parties: 3M COMPANY, Plaintiff-Appellee, v. AMTEX SECURITY, INC., doing business as Amtex Global Services, Defendant-Appellant.
• Docket Number: No. 07-3519.
• Decision Date: 16 September 2008

542 F.3d 1193 3M COMPANY, Plaintiff-Appellee,
v.
AMTEX SECURITY, INC., doing business as Amtex Global Services, Defendant-Appellant. No. 07-3519. United States Court of Appeals, Eighth Circuit. Submitted: June 11, 2008. Filed: September 16, 2008.

[542 F.3d 1195]

Robert A. Burke, argued, Philadelphia, PA, (Brian S. Gocial, Philadelphia, PA and Sarah E. Bushnell, Minneapolis, MN, on the brief), for appellant.

James J. Hartnett, argued, Minneapolis, MN (Bernard E. (B.J.) Nodzon, Jr., on the brief), for appellee.

Before MURPHY, BYE, and SHEPHERD, Circuit Judges.

MURPHY, Circuit Judge.

3M Company (3M) brought this matter to compel arbitration with Amtex Securities, Inc. (Amtex) of Amtex's claims in the Southern District of Texas for breach of contract, tortious interference, fraudulent inducement, unjust enrichment, and breach of the duties of good faith and fair dealing. The district court¹ granted the motion to compel, and Amtex appeals. We affirm.

I.

In 2005 3M sought proposals from vendors to serve as the integrated service provider for 3M's production plant in Greenville, South Carolina. The integrated service provider was to ensure efficient operation of the plant by providing various administrative, technical, and professional services. Amtex offered a proposal which 3M accepted.

3M and Amtex entered into two agreements on February 13, 2006. The master agreement covered general terms of the parties' relationship such as confidentiality, indemnification, and responsibility for paying taxes and obtaining permits. A separate subagreement detailed the duration, scope of services, and contract price for services at the Greenberg plant. The subagreement also permitted 3M to contract with Amtex for services at other facilities without modifying the master agreement. Both agreements are governed by South Carolina law, and only the subagreement has an arbitration clause.

The scope of services provision in the subagreement indicated that Amtex's duties would include records management, pest control, ordering and delivery of items necessary to operate the plant, repairs and maintenance, general construction contracting, electrical installations, painting services, and equipment rental. The fixed contract price in the subagreement for 2006 was $7,128,224, an amount calculated to include a premium above Amtex's expected costs.

The subagreement called for quarterly reviews of Amtex's actual costs to determine if they fell outside upper or lower control limits. If they fell outside of either, the parties would "jointly investigate and determine the cause of the variation." A variation within Amtex's control required no action. On the other hand, variations caused by a change in production output, equipment additions, or changes to equipment or processes at the plant were to be treated as changes to the original scope of services. In those circumstances the parties were to issue a "change order amendment" to the subagreement calling for a one time lump sum payment to Amtex

542 F.3d 1196

or credit to 3M to reflect the actual cost increase or decrease of the change.

The subagreement includes an arbitration clause in Article 4D. This clause requires arbitration in St. Paul, Minnesota if the parties cannot agree on "any of the following: a) whether a variation has occurred; b) the cause of any variation; or c) the value of a change order amendment." A "change order amendment" is defined as an amount which reflects "the actual cost increase or decrease of the Change(s)," and "Changes" are defined very broadly as "changes within the original scope of Services." The parties thus agreed to arbitrate any dispute regarding the existence, cause, or value of any change to the scope of services Amtex was to provide. The master agreement also includes a disputes provision ("general disputes clause"), Article 17, which does not require arbitration but instead gives each party the right to pursue "any legal remedy" for "any claim arising out of or attributable to the interpretation of the agreement." The parties agreed that whenever the two agreements conflicted or addressed the same topic, the subagreement would take precedence over the master agreement.

Almost immediately after entering into the agreements, the parties began to disagree about the scope of services Amtex was required to provide. During 2006 the parties mutually agreed to eliminate various items from the scope of Amtex's services, reducing the contract price to $5,882,838. While 3M paid Amtex $5,350,704 of the reduced contract price from February through November 2006, Amtex paid its vendors only $3,802,599. The difference of $1,548,105 in Amtex's favor meant that Amtex had received far in excess of a premium over its costs for that period.

Amtex stopped paying its vendors because it believed that 3M had forced it to perform services outside the scope outlined in the subagreement and that it was entitled to, but had not received, an increase in the contract price. 3M disagreed, and the parties terminated the master agreement and subagreement effective December 31, 2006. At that time Amtex still held unpaid vendor invoices of approximately $1.2 million.

Amtex sent a letter to 3M on March 2, 2007, demanding $1,650,000 in quantum meruit or in the alternative $1,102,896 as an "equitable adjustment under Article 4 of the [subagreement]" for causing a variation in Amtex's costs. 3M responded by accusing Amtex of misappropriation. Amtex filed a complaint in Texas state court on March 30, 2007, alleging unjust enrichment, breach of contract, breach of the duties of good faith and fair dealing, and tortious interference with contract; the complaint sought only compensatory damages. 3M removed the matter to federal court in the Southern District of Texas based on diversity jurisdiction.

3M filed a demand for arbitration with the American Arbitration Association (AAA) in July 2007 and then a motion to compel arbitration in the federal district court in Minnesota. It requested arbitration in St. Paul under § 4 of the Federal Arbitration Act, 9 U.S.C. §§ 1-16, seeking $1.2 million from Amtex or an order requiring it to pay its subcontractors. In its motion papers in the district court, 3M argued that Amtex's demand for an equitable adjustment of the contract price under Article 4 of the subagreement relates to a variation and therefore falls within the scope of that agreement's arbitration clause.

Shortly after 3M demanded arbitration Amtex amended its complaint in the Southern District of Texas on August 1, 2007, to include claims for fraud, tortious interference, and violations of the South

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Carolina Unfair Trade Practices Act, requesting consequential and punitive damages and attorney fees in addition to the compensatory damages sought in its original filing. 3M moved under 9 U.S.C. § 3 that the district court in Texas stay proceedings on Amtex's amended complaint until the district court in Minnesota ruled on its motion to compel arbitration. The district court in Texas granted the stay.

3M's memorandum of law in support of its motion for arbitration contended that...