ConnTech Development Co. v. University of Connecticut Educ. Properties, Inc.
| Citation | 102 F.3d 677 |
| Decision Date | 19 December 1996 |
| Docket Number | D,No. 225,225 |
| Parties | , 114 Ed. Law Rep. 1031 CONNTECH DEVELOPMENT COMPANY, Plaintiff-Appellee, v. UNIVERSITY OF CONNECTICUT EDUCATION PROPERTIES, INC., Defendant-Appellant. ocket 96-7256. |
| Court | United States Courts of Appeals. United States Court of Appeals (2nd Circuit) |
Bourke G. Spellacy, Updike, Kelly & Spellacy, P.C., Hartford, CT (Thomas J. Shortell, James M. Connor, Michael P. Botelho, Updike, Kelly & Spellacy, P.C., Hartford, CT, of counsel), for Plaintiff-Appellee.
Edward F. Hennessey, Robinson & Cole, Hartford, CT (Matthew J. Cholewa, Bradford S. Babbitt, Robinson & Cole, Hartford, CT, of counsel), for Defendant-Appellant.
Before: MINER, JACOBS and PARKER, Circuit Judges.
Defendant-appellant University of Connecticut Education Properties, Inc. ("UCEPI") appeals from a judgment entered in the United States District Court for the District of Connecticut (Squatrito, J.) granting the motion of plaintiff-appellee ConnTech Development Company ("ConnTech") to confirm an arbitration award of $2,413,179 in favor of ConnTech.
On appeal, UCEPI contends, inter alia, that the district court abused its discretion by retaining jurisdiction of this case, that ConnTech raised issues which were not arbitrable, and that the arbitrators exceeded the scope of their authority. For the reasons that follow, we affirm the judgment of the district court in all respects.
In the early 1980s, the State of Connecticut planned to construct a research and development park in Mansfield, Connecticut, near the campus of the University of Connecticut ("UCONN"). In 1982, UCEPI was incorporated by the Connecticut legislature for the purpose of overseeing the construction of the park. UCEPI leased a 390-acre parcel of land from the State for the development of the park.
On May 19, 1983, Sunrise Development Co. ("Sunrise") and UCEPI entered into an agreement, memorialized in a "Master Development Agreement" ("MDA"), for the development of the proposed park. In September of 1985, Sunrise assigned its interest in the project to ConnTech, a general partnership composed of DKM Properties Corp., a New Jersey corporation having its principal place of business in New Jersey, and Flagship Properties, Inc., an Ohio corporation having its principal place of business in Ohio. Under the MDA, ConnTech was to be the "master developer" of a hotel, conference center, housing units, and research park. In addition, ConnTech was required to construct the roads and provide for the utilities in the park. UCEPI was required to obtain the necessary permits and coordinate the project with UCONN.
The MDA also included provisions for dispute resolution and for the winding up of the parties' relationship under a variety of circumstances. Article 26 of the MDA, which is entitled "Arbitration", controlled circumstances Section 26.01 In the event a controversy or breach by either party under this Agreement shall arise as to the construction, enforcement or application thereof, the parties hereby agree to submit such issue to arbitration at the office of the American Arbitration Association situated nearest to Hartford, Connecticut and to have the matter settled by arbitration before a panel of three (3) arbitrators appointed and governed by the Construction Industry Arbitration Rules of the American Arbitration Association. The arbitrators shall be authorized to award the costs and expenses of arbitration to the prevailing party or to equitably distribute such costs and expenses. Judgment upon any award rendered by the arbitrators shall be final and may be entered in any court of competent jurisdiction. In the event of arbitration, the parties hereby agree that the arbitrators will be urged to permit discovery as long as said discovery does not unduly delay the arbitration process.
involving breach of the MDA. Article 26 provides:
The MDA also contains a specific provision relating to default. Section 25.02 provides that, "[i]n the event of a default by UCEPI or [ConnTech], the non-defaulting party shall be entitled to (i) terminate this Agreement upon fifteen (15) days prior written notice to the other, and (ii) such other remedies available at law or equity."
Over time, the development project encountered a variety of problems and the project development goals were not being met. Disputes between the parties arose in regard to interpretation of their responsibilities under the MDA and assessment of blame for the slow pace of development. Finally, on February 1, 1990, ConnTech and UCEPI exchanged default notices.
On March 30, 1990, ConnTech submitted a claim for arbitration to the American Arbitration Association ("AAA"), alleging that UCEPI had breached the MDA and seeking declaratory and equitable relief and money damages. On that same day, ConnTech commenced an action in the district court seeking to maintain the status quo for the duration of the arbitration proceedings by restraining UCEPI from terminating the MDA, hiring another developer, or assigning its lease of the development property. On April 17, 1990, UCEPI moved to dismiss ConnTech's complaint for lack of subject matter jurisdiction, arguing that the State of Connecticut was an indispensable party to the action that could not be joined, and that the court lacked diversity jurisdiction. The district court denied UCEPI's motion.
Thereafter, UCEPI asserted counterclaims alleging that ConnTech had breached the MDA and had committed fraud and unfair trade practices. In response, ConnTech moved to stay proceedings in the district court on UCEPI's counterclaims, alleging that the disputes should be arbitrated. On January 4, 1991, the district court stayed proceedings on UCEPI's counterclaim, finding that they were subject to arbitration pursuant to the MDA.
The parties then proceeded with arbitration of the issues raised by their various allegations. The arbitrators conducted an extensive examination of the relevant evidence. On September 13, 1993, near the conclusion of the arbitration process, UCEPI filed ten motions in the district court, including a motion to dismiss the action or, alternatively, to dismiss the order of arbitration because of ConnTech's refusal to perform during arbitration; a motion to determine questions of arbitrability; and a renewed motion to dismiss for lack of jurisdiction. While UCEPI's motions were pending in district court, the arbitrators found that UCEPI had materially breached the MDA, declared that the MDA was without further force or effect as to either party, and ordered UCEPI to pay ConnTech $2,413,179.
UCEPI moved to vacate, correct or modify the arbitration award on the ground that it was manifestly erroneous and exceeded the arbitrators' authority, and that the district court's order of arbitration was void due to an alleged violation of the 11th Amendment. ConnTech then moved to affirm the arbitration award. The motions were referred to a magistrate judge, who recommended that ConnTech's motion to confirm be granted and UCEPI's motion to vacate, correct or modify be denied. The district court adopted
these recommendations and confirmed the arbitration award. The district court denied UCEPI's motions to dismiss, and denied the other pending motions as moot. This appeal followed.
On appeal, UCEPI first argues that the court lacked subject matter jurisdiction because the parties were not diverse. This argument is without merit.
Diversity jurisdiction exists where the matter in controversy exceeds $50,000, 1 and is between citizens of different states. 28 U.S.C. § 1332(a). A corporation is considered "a citizen of any State by which it has been incorporated and of the State where it has its principal place of business." § 1332(c)(1). "When reviewing a district court's determination of its subject matter jurisdiction, we review factual findings for clear error and legal conclusions de novo." McCarthy v. Navistar Fin. Corp. (In re Vogel Van & Storage, Inc.), 59 F.3d 9, 11 (2d Cir.1995).
There is no dispute that UCEPI, a corporation, is a Connecticut citizen. UCEPI insists that ConnTech, a partnership composed of corporate citizens of New Jersey and Ohio, should be deemed a citizen of Connecticut because ConnTech was established "for the sole purpose of acting as master developer pursuant to the MDA" and because ConnTech "acted wholly within Connecticut." However, in Carden v. Arkoma Assocs., 494 U.S. 185, 110 S.Ct. 1015, 108 L.Ed.2d 157 (1990), the Supreme Court held that the citizenship of a partnership is based upon the citizenship of the individual partners, without regard to the location of the partnership entity. Id. at 195-96, 110 S.Ct. at 1021-22; see Great S. Fireproof Hotel Co. v. Jones, 177 U.S. 449, 456, 20 S.Ct. 690, 693, 44 L.Ed. 842 (1900) (). As no ConnTech partner is a citizen of Connecticut, ConnTech is a diverse party. Thus, the district court was properly vested with jurisdiction over the claims in this case.
UCEPI's next contention is that the district court erred in not dismissing the action for the nonjoinder of an indispensable party. UCEPI argues that Connecticut is an indispensable party, but because Connecticut could not be joined pursuant to the Eleventh Amendment to the United States Constitution, the case should have been dismissed. We disagree.
In determining whether an action should be dismissed for nonjoinder, the court proceeds under the framework set forth in Fed R.Civ.P. 19. The court must initially determine whether the party should be joined as a "necessary party" under Rule 19(a). Subsection (a) provides, in relevant part, that
[a] person who is subject to service of process and whose joinder will not deprive the court of jurisdiction over the subject matter of the action shall be joined as a...
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