P & P INDUSTRIES, INC. v. Sutter Corp.

• Decision Date: 28 May 1999
• Docket Number: No. 98-6358.,98-6358.
• Citation: 179 F.3d 861
• Parties: P & P INDUSTRIES, INC., an Oklahoma corporation, Plaintiff-Appellant, v. SUTTER CORPORATION, a California corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

179 F.3d 861

P & P INDUSTRIES, INC., an Oklahoma corporation, Plaintiff-Appellant, v. SUTTER CORPORATION, a California corporation, Defendant-Appellee.

No. 98-6358.

United States Court of Appeals, Tenth Circuit.

May 28, 1999.

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Gary L. Levine (Stephen G. Solomon with him on the briefs), Derryberry, Quigley, Solomon & Naifeh, Oklahoma City, Oklahoma, for Appellant.

Edward J. McIntyre, Solomon, Ward, Seidenwurm & Smith, LLP, San Diego, California, for Appellee.

Before ANDERSON, BARRETT, and HENRY, Circuit Judges.

STEPHEN H. ANDERSON, Circuit Judge.

Appellant P & P Industries, Inc. (P & P) appeals from an order and judgment of the district court confirming an arbitration award in favor of Appellee Sutter Corporation (Sutter). This case presents three issues, two of which concern the district court's power to confirm the award, and one of which concerns the merits of the district court's confirmation of the award. First, we must determine whether any federal district court could have jurisdiction to confirm the arbitration award in this case. Section 9 of the Federal Arbitration Act (FAA), 9 U.S.C. § 9, authorizes confirmation only where the parties have agreed that a "judgment of the court" would be entered upon any arbitration award. Second, if we decide that the parties agreed to judicial confirmation of their arbitration award, we must then determine whether the United States District Court for the Western District of Oklahoma was a proper forum for confirmation of the arbitration award in this case. Finally, if we decide that the district court had jurisdiction and was the proper forum, we must decide whether the district court properly confirmed the award. For the reasons discussed below, we hold as follows: (1) the parties agreed to judicial confirmation of their arbitration award; (2) the Western District of Oklahoma was a proper forum for confirmation; and (3) the district court properly confirmed the award.

BACKGROUND

Sutter is a California corporation specializing in the manufacture of post-operative rehabilitation devices. Prior to March 1993, Paul Patredis was Sutter's sole sales representative in Oklahoma and Arkansas. In early 1993, Patredis and James Patton formed P & P Industries, Inc., which, on March 1, 1993, signed an exclusive Agency Agreement ("the Agreement") with Sutter. The Agreement granted P & P the right to exclusively represent Sutter products in parts of Oklahoma and Arkansas (and, after December 1994, in parts of Texas) for a five-year period, with an option to renew the Agreement for two additional five-year periods. Soon after signing the Agreement, P & P hired several staff members.

The Agreement contained an arbitration clause which stated that "any controversy, claim, or breach arising out of or relating to this Agreement which the parties are unable to resolve to their mutual satisfaction shall be resolved by arbitration before the American Arbitration Association, in the office of the Association nearest the principal place of business of P & P." I App. at 18.

Sometime during the summer of 1995, Sutter became aware that P & P was allegedly "engaged in a kickback scheme with a physician, engaged in embezzlement, and had diverted Sutter payments to employees and had misappropriated Sutter revenue." Appellee's Br. at 5. On August 10, 1995, Sutter filed an arbitration demand with the American Arbitration Association (AAA) in Dallas, Texas, the AAA office nearest to P & P's principal place of business in Oklahoma. Sutter also unilaterally terminated the Agreement, effective August 14. Between August 11 and August 14, Sutter allegedly contacted all of P & P's employees and urged them to resign from P & P and to sign on with Sutter, and most of them did so.

P & P was notified of Sutter's actions on August 14. Three days later, P & P filed a complaint in federal district court in the Western District of Oklahoma, seeking compensation for Sutter's unilateral breach of the Agreement, as well as for various alleged tortious actions, such as tortious interference with P & P's contract rights. P & P also sought a declaratory judgment interpreting the arbitration clause of the Agreement. Soon after P & P's complaint was filed, Sutter moved the court to stay the proceedings pending arbitration. In response, P & P conceded that the breach of contract claims in its complaint were arbitrable. However, P & P argued that the balance of its claims were not arbitrable under the Agreement, and that in any case any arbitration award made pursuant to the Agreement's arbitration clause was not subject to confirmation by a federal district court.

On October 5, 1995, before the federal district court had ruled on Sutter's motion to stay, P & P notified the AAA that "to avoid a default" it intended to participate in the arbitration, but that it "did not intend to waive any of its judicial rights by participation," and it "specifically objected to `AAA' Rule 47(c)."¹ I App. at 211. The next day, it filed a counterclaim with the AAA in Dallas, which, after amendment, sought $16 million in damages.

On November 6, 1995, the district court granted Sutter's motion to stay proceedings, ruling that all of P & P's claims were arbitrable under the Agreement. The district court did not discuss whether any eventual arbitration award would be subject to confirmation by a federal district court. On November 8, 1995, P & P forwarded a copy of the district court's order to the AAA, and enclosed a cover letter in which it again professed to reserve its judicial rights, and again objected to the application of AAA Rule 47(c).

The dispute, in its entirety, was arbitrated in Dallas in January 1996. On March 22, 1996, the arbitrator issued an award, finding in favor of Sutter and ordering P & P to pay Sutter $112,562 in damages. Furthermore, the arbitrator specifically found that Sutter had the right to terminate the Agreement as it did, and that P & P's tort-based claims were without merit.

On April 4, 1996, Sutter notified the Oklahoma district court that the arbitration had been completed. On that same day, P & P filed a motion asking the Oklahoma district court to vacate the award on the ground that the arbitrator had exceeded his authority.

About a week later, Sutter filed a motion for confirmation of the award in federal district court in the Northern District of Texas. Sutter filed this motion in Texas because 9 U.S.C. §§ 9-10 can arguably be interpreted to require that arbitration awards be confirmed and/or vacated only in the district where the award was handed down.

In late April, Sutter responded to P & P's motion to vacate the arbitration award, filed in the Oklahoma district court, on its merits, but also pointed out to the Oklahoma district court that there was some doubt about whether it had the power to vacate the award. Sutter also moved for confirmation of the award, as it had in the Texas federal court.

In May, P & P appeared in federal court in Texas, and asked that court to dismiss the case and transfer it back to Oklahoma, or, in the alternative, to stay proceedings until the Oklahoma federal court had ruled on P & P's Oklahoma motion to vacate the award. In July, P & P filed a motion to vacate the arbitration award, as it had in the Oklahoma federal court. Thus, both the Texas and Oklahoma federal courts had virtually identical motions before them—one from P & P to vacate the award, and one from Sutter to confirm it.

The Texas court ruled first on the motions. On August 14, 1996, it denied P & P's motions to dismiss, transfer, or stay the Texas proceedings, as well as P & P's motion to vacate the award, and granted Sutter's motion to confirm the award. The Texas district court ruled that 9 U.S.C. §§ 9-10 mandated that the court in the district where the award was handed down was the only federal district court that could confirm or vacate an arbitration award. When the Oklahoma district court heard of the Texas court's disposal of the issues, it stayed its proceedings on the similar motions until the Texas court's rulings could be appealed to the United States Court of Appeals for the Fifth Circuit.

On October 27, 1997, the Fifth Circuit ruled that the Texas district court had misinterpreted the FAA, and that the court in the district in which an arbitration award was handed down was not the only federal district court that could confirm or vacate that award. Sutter Corp. v. P & P Indus., Inc., 125 F.3d 914, 919 (5th Cir. 1997). Applying the "first to file rule," it remanded the case back to the Texas district court with instructions to transfer the case to the Oklahoma district court for a decision as to whether the Texas proceedings should be consolidated with the Oklahoma proceedings. Id. at 920.

The very next day, P & P filed a motion in the Oklahoma district court, requesting that it act on the motions it had stayed pending the Fifth Circuit appeal. A few months later, on August 6, 1998, the Oklahoma district court issued an order granting Sutter's motion to confirm the award. The district court also denied P & P's motion to vacate the award, reaffirming its earlier decision that all of P & P's claims, not just the breach of contract claims, were arbitrable, and ruling that the arbitrator had therefore not exceeded his authority by ruling on the tort-based claims. The district court held that it had jurisdiction to confirm the award, because the parties' arbitration clause contemplated judicial confirmation of awards, and because the FAA allowed any federal district court, not just the one in the district where the award was rendered, to confirm an arbitration award. On September 2, 1998, the district court entered judgment in favor of Sutter.

P & P now appeals from this order and judgment of the district court.

DISCUSSION

At the outset, we note the "liberal federal policy favoring arbitration." Moses H. Cone Mem'l Hosp. v. Mercury Constr....