Coady v. Ashcraft & Gerel, Civ.A. 97-11937-WGY.
| Decision Date | 09 March 1998 |
| Docket Number | No. Civ.A. 97-11937-WGY.,Civ.A. 97-11937-WGY. |
| Citation | 996 F.Supp. 95 |
| Parties | Edward Paul COADY, Petitioner, v. ASHCRAFT & GEREL, Respondent. |
| Court | U.S. District Court — District of Massachusetts |
Patrick T. Jones, Cooley, Manion, Moore & Jones, P.C., Boston, MA, for Edward Paul Coady.
Peter A. Biagetti, Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, P.C., Boston, MA, Stuart H. Newberger, Tara W. Blanchard Crowell & Moring, Washington, DC, for Ashcraft & Gerel.
This application, which the petitioner Edward Paul Coady ("Coady") filed originally in the Massachusetts Superior Court sitting in and for the County of Suffolk, seeks an order pursuant to Mass.Gen.Laws ch. 251 directing the parties to proceed to arbitration. The respondent, Ashcroft & Gerel, promptly removed the action to this court on the basis of diversity of citizenship. The matter came before the Court on November 13, 1997, on the motion of Ashcraft & Gerel to dismiss, stay, or transfer venue. After oral argument, this Court ordered the transfer of this action to the United States District Court for the District of Columbia, stating from the bench that it had no discretion in the premises due to the venue provisions of both the Federal Arbitration Act, 9 U.S.C. § 1 et seq. and Mass.Gen.Laws ch. 251.
This pronouncement caught the parties flat footed, as transfer had been urged (and opposed) on other grounds. Ashcraft & Gerel adopted the Court's reasoning at once. Coady promptly moved for reconsideration. After thorough reflection, I find I'm going to have to eat my words.1
Ashcraft & Gerel is a law firm with its principal place of business in Washington, D.C. The law firm has several branch offices including one in Boston, Massachusetts. Coady, a resident of Massachusetts, is the managing attorney of Ashcraft & Gerel's law office in Boston. He was hired by the firm in 1989 and has been the managing attorney for at least five years.
In August, 1991, the parties entered into and executed a so-called "Prenuptial Agreement." Def.'s Reply, Ex. A. The purpose of the Prenuptial Agreement is to address the process for Coady's voluntary or involuntary departure from Ashcraft & Gerel, particularly the apportionment of fees generated from Coady's continued representation of former Ashcraft & Gerel clients. The Prenuptial Agreement contains an arbitration provision which states:
11. In the event of any dispute over the construction, interpretation or application of this Agreement, the parties agree to binding arbitration under the rules of the American Arbitration Association.
(emphasis added).
On July 29, 1993, Coady and Ashcraft & Gerel entered into and executed a written Employment Agreement. Def.'s Reply, Ex. A. The Employment Agreement contains an arbitration provision which states:
5. It is agreed by the parties that any ambiguities or questions of interpretation of this contract shall be the subject of discussions by Coady and a [partners' committee]. ... Any decision which they may reach in such a matter shall be binding on the partnership. Either party may at this [sic] option elect to submit the matter to Binding arbitration, the reasonable expenses and costs of which will be borne by the loser; however, both parties agree to use reasonable means and good faith to attempt to resolve any differences that may arise prior to resorting to arbitration.
(emphasis added).
On February 26, 1997, Coady sent a letter to Ashcraft & Gerel stating that Ashcraft & Gerel had breached the terms of the Employment Agreement and exercising his alleged option to submit the matter to binding arbitration. In a letter dated March 17, 1997, Coady asserted that Ashcraft & Gerel breached the terms of the Employment Agreement by withholding compensation; by withholding annual and semi-annual earning statements for the Boston office; by hiring a relative of a partner for the Boston office without Coady's approval; and by threats to terminate Coady's employment if he exercised his right to seek arbitration of this employment dispute. Def.'s Reply, Ex. A.
The parties entered into negotiations during April and May, 1997, but without success. Ashcraft & Gerel asserted that Coady had breached the Employment Agreement, claiming Coady used a firm credit card for personal expenses and withheld required information from Ashcraft & Gerel regarding the Boston office. In a letter dated May 27, 1997, Coady accused Ashcraft & Gerel of bad faith in the negotiations and reasserted his intention to exercise the arbitration option, requesting Ashcraft & Gerel to provide an arbitration date. Application, Letter of May 27, 1997, from Patrick T. Jones to Robert G. Samet as Plt's. Ex. E. In response, Ashcraft & Gerel sent a letter the following day stating both its intention to take the matter to arbitration and its desire for written reports from Coady on the Boston office. Plt's. Opp. Mot. Dismiss, Stay, or Transfer Venue Resp., Letter of May 28, 1997, from Robert G. Samet to Edward P. Jones as Plt's. Ex. 2.
On July 15, 1997, Coady sent a letter to Ashcraft & Gerel entitled "Notice of Breach Employment Contract" in which Coady stated that Ashcraft & Gerel's failure to pay the salary bonuses due Coady constituted a breach of the contract and set a cure date of August 15, 1997. Application, Letter from Patrick t. Jones to Allen J. Lowe et al (15 July 1997) as Plt's. Ex. G.
On August 1, 1997, Ashcraft & Gerel filed a complaint for damages and declaratory judgment in the United States District Court for the District of Columbia. ("Ashcraft & Gerel Complaint").2 In the Ashcraft & Gerel Complaint, Ashcraft & Gerel alleges breach of contract, conversion, and breach of fiduciary duty; and seeks a declaration of enforceability regarding the Prenuptial Agreement, a declaration of termination with cause under the Employment Agreement, and an accounting. Coady was served with the summons and complaint on August 11, 1997.
Shortly thereafter, on August 19, 1997, Coady filed a Verified Application for Arbitration pursuant to Mass.Gen.Laws, ch. 251, § 1 et seq. with the Suffolk Superior Court ("Application").3 Ashcraft & Gerel was served on August 21, 1997. Ashcraft & Gerel filed a Notice of Removal on August 26, 1997, and removed the Massachusetts case to this court. This Court may exercise subject matter jurisdiction over this matter based on diversity of citizenship.
The Governing Law.
This Court must first determine whether the Massachusetts Uniform Arbitration Act, Mass.Gen.Laws ch. 251, § 1 et seq. or the Federal Arbitration Act, 9 U.S.C. § 1 et seq. applies to this case.
The Federal Arbitration Act is applicable to many proceedings to enforce the arbitration provisions of contracts affecting interstate commerce,4 but it does not itself create federal question jurisdiction. An independent basis for federal court jurisdiction must also exist in order for the Federal Arbitration Act to apply.5 The Federal Arbitration Act is thus applicable to cases removed from state court to federal court on the basis of diversity jurisdiction where the arbitration provision is part of "a contract evidencing a transaction involving commerce." 9 U.S.C. §§ 2 & 3. See New England Energy Inc. v. Keystone Shipping Co., 855 F.2d 1, 3 (1st Cir.1988). The Supreme Court has interpreted the Federal Arbitration Act to be a rule of substantive law applicable in both federal and state courts to transactions involving interstate commerce, which is "intended to foreclose state legislative attempts to undercut the enforceability of arbitration agreements." Southland Corp. v. Keating, 465 U.S. 1, 14-16, 104 S.Ct. 852, 79 L.Ed.2d 1 (1984); see also New England Energy Inc. at 4. The Federal Arbitration Act, however, specifically excludes from its jurisdiction "contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce." 9 U.S.C. § 1. This employment contract exclusion is not coextensive with the reach of the Act, rather it applies only to employment contracts involving the interstate transportation of goods. See Dickstein v. duPont, 443 F.2d 783, 785 (1st Cir.1971) (emphasis supplied).
In this case, the Employment Agreement at issue involves a Massachusetts — based lawyer and a Washington, D.C. — based law firm who entered into a contract under which the Massachusetts lawyer agreed to provide and oversee the provision of legal services to clients of the firm involved in asbestos litigation in Massachusetts and Connecticut. Such a contract deals generally with interstate commerce but not the interstate transportation of goods; therefore, the exclusion is inapplicable and the first jurisdictional requirement is met. Diversity of citizenship supplies the second jurisdictional requirement. Accordingly, the Federal Arbitration Act applies here as to any provision inconsistent with the Massachusetts Arbitration Act.
The Proper Venue.
Pursuant to section 4 of the Federal Arbitration Act, an application for arbitration may be filed in any federal district court where the jurisdictional requirements are met. The hearing on whether to grant such an application (as well as the arbitration proceeding) "shall be within the district in which the petition for an order directing such arbitration is filed." 9 U.S.C. § 4. Thus, Massachusetts is a proper venue for the determination of arbitrability.
Ashcraft & Gerel's Motion to Dismiss, Stay, or Transfer Venue.
Having corrected the procedural misstep, the Court returns to the issues raised by Ashcraft & Gerel's Motion to Dismiss, Stay or Transfer Venue. There is no valid basis for the dismissal of this case and Ashcraft & Gerel do not seriously contend otherwise. Nor will this Court stay the Application as such action would defeat one of the federal policy objectives behind the Act: the expeditious resolution of disputes. See Moses H. Cone Memorial...
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