Axiall Can. Inc. v. MECS Inc.
| Decision Date | 05 February 2021 |
| Docket Number | CASE NO. 2:20-CV-01535 |
| Citation | 517 F.Supp.3d 603 |
| Court | U.S. District Court — Western District of Louisiana |
| Parties | AXIALL CANADA INC. v. MECS INC. |
Christopher P. Ieyoub, Plauche’ Smith & Nieset, Lake Charles, LA, for Axiall Canada Inc.
Michele Hale DeShazo, Deborah D. Kuchler, Michael S. Harrison, II, Kuchler Polk Weiner, New Orleans, LA, for MECS Inc.
MEMORANDUM RULING
Before the court is a "Motion to Dismiss and Compel Arbitration or, in the alternative, Motion to Stay and Compel Arbitration" [doc. 4] filed by defendant MECS, Inc. ("MECS") under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(3). Plaintiff Axiall Canada, Inc. ("Axiall Canada") opposes the motion. Doc. 9. The matter came before the court for oral argument on February 4, 2021, and the undersigned now issues this ruling.
This suit arises from the sale of mist eliminators by MECS, a manufacturing company specializing in equipment used in the chemical manufacturing and processing industry, to Axiall Canada, which owns and operates a chlor-alkali manufacturing facility in Beauharnais, Quebec. See doc. 1, att. 1. Beginning in July 2019, Axiall Canada purchased 16 demisters from MECS at a total price of $525,000. Id. at p. 3, ¶ 4. The transactions were completed when MECS issued a proposal setting forth terms of sale, after which Axiall Canada submitted purchase orders. See doc. 4, att. 2; doc. 9, att. 1. MECS then issued order acknowledgments confirming the sales.1 See doc. 4, att. 3. All of these documents expressly condition contract formation on the respective parties’ agreement to their general terms and conditions.2 Doc. 4, att. 2, p. 5; doc. 4, att. 3, p. 1; doc. 9, att. 1, p. 1. Axiall Canada's terms and conditions contain a choice of law clause, stating that disputes arising from the agreement will be decided under Louisiana or Kentucky law, with venue and jurisdiction in either Lake Charles, Louisiana, or Calvert City, Kentucky. Doc. 9, att. 1, p. 4. MECS's terms and conditions contain an arbitration clause, providing that New York law will govern the dispute and that disputes arising from the transaction must be resolved by arbitration. Doc. 4, att. 2, p. 5; doc. 4, att. 3, p. 3.
Axiall Canada alleges that the demisters began to fail within weeks of installation. Id. It further alleges that MECS accepted the equipment for repairs but was not able to solve the problem until January 2020. Id. at pp. 3–4, ¶ 4. Axiall Canada then brought suit for breach of contract, breach of warranty, and redhibition against MECS in the 14th Judicial District Court, Calcasieu Parish, Louisiana, pursuant to the forum selection clause in the purchase orders. Id. at p. 3, ¶ 3. MECS removed the suit to this court on the basis of diversity jurisdiction, 28 U.S.C. § 1332. Doc. 1.
MECS now moves to dismiss or stay the suit and compel arbitration. Doc. 4. Specifically, it argues that Axiall Canada is bound by the arbitration clause in the proposals and order acknowledgments issued by MECS. Axiall Canada opposes the motion, arguing that (1) MECS accepted by performance the terms and conditions attached to Axiall Canada's purchase orders and (2) these terms bar enforcement of the arbitration clause as a contract term between the parties. Doc. 9.
Rule 12(b)(1) authorizes dismissal of a case for lack of subject matter jurisdiction. Because of the fundamental nature of subject matter jurisdiction, the court will consider a motion under Rule 12(b)(1) before it considers other challenges. Ramming v. United States , 281 F.3d 158, 161 (5th Cir. 2001). Rule 12(b)(3), on the other hand, allows a court to dismiss an action for improper venue. Fed. R. Civ. P. 12(b)(3). Under existing Fifth Circuit precedent, it is unclear which rule provides the best route for dismissing a suit based on an arbitration clause. See McDonnel Grp., LLC v. Great Lakes Ins. SE, UK Branch , 923 F.3d 427, 430 n. 5 (5th Cir. 2019) (). As this district recently noted, it is unnecessary to decide between the two approaches since the standards of review are so similar and the outcome will be the same in any case if the court finds that the arbitration clause is binding. Murray v. Waitr Holdings, Inc. , 2019 WL 7944814, at *3 (W.D. La. Nov. 14, 2019), report and recommendation adopted , 2020 WL 763038 (W.D. La. Feb. 14, 2020).
Under Rule 12(b)(3), the burden of sustaining venue rests with the plaintiff. Bayco Prods., Inc. v. ProTorch Co., Inc. , 2020 WL 2574626, at *4 (E.D. Tex. May 21, 2020). The court accepts as true all allegations in the complaint and resolves all conflicts in favor of the plaintiff. Id. However, the court may also look beyond the complaint to evidence submitted by the parties. Id. (citing Ambraco, Inc. v. Bossclip B.V. , 570 F.3d 233, 238 (5th Cir. 2009) ). If a dispute is subject to mandatory grievance and arbitration procedures, then the proper course of action is usually to stay the proceedings pending arbitration. See Williams v. Cigna Fin. Advisors, Inc. , 56 F.3d 656, 658–59 (5th Cir. 1995). However, dismissal may be appropriate where all of the issues raised must be submitted to arbitration. Alford v. Dean Witter Reynolds, Inc. , 975 F.2d 1161, 1164 (5th Cir. 1992).
The Federal Arbitration Act ("FAA"), 9 U.S.C. § 1 et seq. , controls the validity and enforcement of arbitration agreements. Walton v. Rose Mobile Homes, LLC , 298 F.3d 470, 473 (5th Cir. 2002). Under this law, agreements to arbitrate are enforceable except under grounds that exist "at law or in equity for revocation of any contract." 9 U.S.C. § 2. A party aggrieved by the other's alleged failure to honor an arbitration agreement may petition the district court for enforcement of the agreement. Id. at § 4. The court's review involves two steps: deciding (1) "whether the parties entered into any arbitration agreement at all " and then (2) whether the claim at issue is covered by the agreement. Kubala v. Supreme Prod. Servs., Inc. , 830 F.3d 199, 201 (5th Cir. 2016) (emphasis in original). Because the court sits in diversity jurisdiction over this case, it applies Louisiana law to the question of whether a contract is formed and whether MECS is bound under it. See Todd v. Steamship Mut. Underwriting Ass'n, Ltd. , 2011 WL 1226464, at *5 (E.D. La. Mar. 28, 2011) (citing Klaxon Co. v. Stentor Elec. Mfg. Co. , 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941) ). In determining whether a claim falls within the scope of an arbitration agreement, the court applies the law of the state governing the contract as well as the general federal policy favoring arbitration. Wash. Mut. Fin. Grp., LLC v. Bailey , 364 F.3d 260, 263–64 (5th Cir. 2004).
Under Louisiana law, a contract is formed by the consent of the parties as established through the offer and acceptance. La. Civ. Code art. 1927. The offer and acceptance may be made orally, in writing, or by action or inaction "clearly indicative of consent." Id. MECS argues that a contract incorporating all of its terms was formed under Article 1927 when Axiall Canada purchased and accepted the demisters at the agreed-upon price. It also attempts to analogize this case to arbitration clauses accepted by conduct in employment contracts, as recognized in recent cases from this circuit and district. See Marino v. Dillard's, Inc. , 413 F.3d 530 (5th Cir. 2005) ; Murray v. Waitr Holdings, Inc. , 2019 WL 7944814 (W.D. La. Nov. 14, 2019) ; Sewell v. Waitr Holdings, Inc. , 2020 WL 208929 (W.D. La. Jan. 13, 2020). This case, however, presents a classic "battle of the forms" scenario, in which the parties dispute the nature of their contractual relationship, the identity of the documents forming that relationship, and the terms incorporated through those documents. Additionally, it is a contract for the sale of goods containing additional terms in the acceptance and is therefore governed by Louisiana Civil Code Article 2601.
MECS asserts that the claims in this matter are governed by the arbitration clauses in the proposal and order acknowledgment. Accordingly, it insists that Axiall Canada is bound thereby due to the purchase order's silence on the subject and the fact that it otherwise failed to object to the clause. Doc. 4, att. 1, pp. 10–12; doc. 10, pp. 1–3. Axiall Canada responds that either the proposal formed the offer and the purchase order the acceptance "as to the material terms on which both documents agree," or that the purchase order formed the offer and the acknowledgment the acceptance as to such terms. Doc. 9, p. 3. It maintains, under either scenario, that MECS's arbitration term was a material alteration and did not become part of the agreement. Id. at 3–4. It also emphasizes that it objected to the arbitration clause via the inconsistent terms – namely, the forum selection and choice of law clause – in its purchase orders and language in those...
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