Cybertek, Inc. v. Bentley Systems, Inc.

• Decision Date: 07 January 2002
• Docket Number: No. 4:01CV552.,4:01CV552.
• Citation: 182 F.Supp.2d 864
• Parties: CYBERTEK, INC., d/b/a Cyber Systems, Inc., and Holly Shaheen, Plaintiffs, v. BENTLEY SYSTEMS, INC., Defendant.
• Court: U.S. District Court — District of Nebraska

Page 864

182 F.Supp.2d 864

CYBERTEK, INC., d/b/a Cyber Systems, Inc., and Holly Shaheen, Plaintiffs, v. BENTLEY SYSTEMS, INC., Defendant.

No. 4:01CV552.

United States District Court, D. Nebraska.

January 7, 2002.

James D. Sherrets, Theodore R. Boecker, Jr., Sherrets, Boecker Law Firm, Omaha, NE, for plaintiffs.

John P. Passarelli, McGrath, North Law Firm, Omaha, NE, Michael J. Mangan, Matthew Holmwood, Schnader, Harrison Law Firm, Philadelphia, PA, for defendant.

MEMORANDUM AND ORDER

KOPF, Chief Judge.

This matter is before the court on the defendant's motion to dismiss or stay the action pending arbitration (filing 7). Upon careful consideration of the record and the parties briefs,¹ the motion will be granted in part and denied in part.

I. BACKGROUND

Cybertek, Inc., is a Nebraska corporation. Holly Shaheen is the president and CEO of Cybertek, and is alleged to be its sole shareholder. Bentley Systems, Inc., is a Delaware corporation that has its principal place of business in Pennsylvania. On November 20, 1998, Cybertek and Bentley entered into a written contract, designated as a "MicroStation Value Added Reseller (MVAR) Agreement," which authorized Cybertek to distribute Bentley's computer products and services in various states.

Cybertek alleges that it subsequently entered into an agreement with CADD Concepts, Inc. (now operating as Armilian Technology), for the sale of Cybertek's business, excluding equipment and other tangible assets, for the sum of $750,000. It is also alleged that as part of the transaction Shaheen was to receive an executive-level employment contract with Armilian. The deal was made contingent upon Bentley's approval, and the plaintiffs allege that Bentley orally approved the sale. Sometime later, however, Bentley allegedly retracted its approval and stated that it would only approve an assignment of Cybertek's rights under the MVAR Agreement to certain other distributors.

As a result, the plaintiffs claim, the Armilian deal collapsed and Cybertek was forced to sell its business (including a sale of equipment) to TMS Holdings Corporation (d/b/a Itasca Group) and A + CADD Services, Inc., for the total amount of $453,000. Shaheen claims that she lost salary and benefits because her employment contract with Armilian did not materialize, and that she has suffered mental anguish because of Bentley's alleged wrongful conduct.

In addition to not approving the Armilian sale, it is alleged the Bentley failed to pay Cybertek commissions totaling $131,345 for sales made to the Nebraska Department of Roads (NDOR); Bentley allegedly withdrew these sales from Cybertek's account and then penalized Cybertek $126,048.39 for failing to meet its sales quotas. It is alleged that while Bentley awarded a partial commission of $47,503.75 for the NDOR sales, this sum was applied against the penalty rather than paid to Cybertek. It is also claimed that Bentley's actions in this regard were part of a plan to force a sale of Cybertek to TMS Holdings Corporation and A + CADD Services, Inc., companies in which Bentley had a financial interest.

The plaintiffs initiated this action by filing a petition in the District Court of Douglas County, Nebraska, on September 26, 2001. Bentley removed the action to federal court on October 22, 2001, based on diversity jurisdiction. The pending motion was filed on November 2, 2001, and Bentley has since filed an answer² in which it avers as an affirmative defense that the plaintiffs' action is barred by an arbitration clause in the MVAR Agreement (§ 11.11), which provides:

In the event of any dispute, controversy or claim between the parties arising under or related to this Agreement, the parties shall submit to binding arbitration before a single arbitrator in Philadelphia, Pennsylvania in accordance with the Commercial Arbitration Rules of the American Arbitration Association. The decision of the arbitrators shall be final and binding on the parties, and the judgment upon the award rendered by the arbitrators shall be enforceable in any court of competent jurisdiction. Each party shall bear its own attorney's fees, costs, and expenses incurred in such arbitration.

Bentley has not moved to compel arbitration, nor is there any evidence that steps have been taken by it to initiate arbitration. The sole issue for determination at this time is whether the plaintiffs' action should either be dismissed or stayed.

II. DISCUSSION

The plaintiffs do not dispute that the MVAR Agreement is a "contract evidencing a transaction involving commerce" and therefore within the scope of the Federal Arbitration Act (FAA). 9 U.S.C. § 2.³ Nor do they dispute that Section 11.11 of the MVAR Agreement is a valid arbitration clause. They do dispute, however, that the arbitration clause applies to all of their claims. Specifically, the plaintiffs argue that the pending motion should be denied because: (1) they have alleged that Bentley fraudulently or negligently misrepresented the facts concerning commissions on the NDOR sales; and (2) Shaheen is not a party to the MVAR Agreement.

Responding to the plaintiffs' first argument, Bentley states that: (1) Cybertek additionally has alleged breach-of-contract claims that undoubtedly are covered by the arbitration clause; and (2) in any event, the alleged tort claims "arise under" or "relate to" the agreement, such that all of Cybertek's claims are arbitrable — and therefore subject to dismissal or stay. As for the plaintiffs' second argument, Bentley contends that Shaheen cannot claim any personal benefit of the MVAR Agreement without also subjecting herself to its arbitration clause. Bentley thus requests that the entire action be dismissed or stayed. Finally, Bentley argues that even if only a portion of the plaintiffs' claims must be submitted to arbitration, the entire action should be stayed pursuant to the court's inherent authority.

A. Arbitrability of Plaintiffs' Claims

Section 3 of the FAA provides that the district court shall stay the trial of an action brought "upon any issue referable to arbitration under an agreement in writing for such arbitration." 9 U.S.C. § 3.⁴ A dispute must be submitted to arbitration if there is a valid agreement to arbitrate and the dispute falls within the scope of that agreement. Lyster v. Ryan's Family Steak Houses, Inc., 239 F.3d 943, 945 (8th Cir.2001).⁵ The Act declares a "liberal federal policy favoring arbitration agreements." Id. (quoting Moses H. Cone Memorial Hosp. v. Mercury Const. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983)).

The purpose of the FAA was to reverse judicial hostility to arbitration agreements and to place arbitration agreements on equal footing with other contracts. Keymer, 169 F.3d at 504 (citing Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991)). Consequently, arbitration agreements are examined in the same light as any other contractual agreement. Id. (citing ITT Hartford Life & Annuity Ins. Co. v. Amerishare Investors, Inc., 133 F.3d 664, 668 (8th Cir.1998)).

Although the Court of Appeals stated in Keymer that "[w]e apply ordinary state law contract principles to decide whether parties have agreed to arbitrate a particular matter," id. (citing First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 115 S.Ct. 1920, 1924, 131 L.Ed.2d 985 (1995); Patterson v. Tenet Healthcare, Inc., 113 F.3d 832, 834 (8th Cir.1997)), this statement should be qualified as pertaining only to state law that "govern[s] the formation of contracts." See First Options, 514 U.S. at 944, 115 S.Ct. at 1924. "Interpretation of an arbitration agreement affecting commerce is determined by federal law. Mediterranean Enterprises, Inc. v. Ssangyong Corp., 708 F.2d 1458, 1463 (9th Cir.1983) (`Federal law ... applies to our determination of the scope of this arbitration agreement.'); ATSA of California, Inc. v. Continental Insurance Co., 702 F.2d 172, 175 (9th Cir.1983) (`Determining what claims fall within the class of disputes governed by an arbitration agreement is a question of federal law.'); American Home Assurance Co. v. Vecco Concrete Construction Co., 629 F.2d 961, 963 (4th Cir.1980)." City of Bismarck v. Toltz, King, Duvall, Anderson, 767 F.2d 429, 431 (8th Cir.1985).

In other words, federal law preempts state law with respect to the interpretation and construction of arbitration agreements that fall within the scope of the FAA. Webb v. R. Rowland & Co., Inc., 800 F.2d 803, 806 (8th Cir.1986). Consequently, even though a contract containing an arbitration clause provides that the law of a particular state shall govern the agreement, a federal district court, in deciding a motion to stay court proceedings under 9 U.S.C. § 3, looks only to federal law in determining the scope of the arbitration clause, and it is immaterial that arbitration is disfavored or limited under the state law.⁶ Id. at 806 n. 4. See also Ackerberg v. Johnson, 892 F.2d 1328, 1334 (8th Cir.1989) (state law cannot determine whether any given claim is arbitrable under the FAA); Barker v. Golf U.S.A., Inc., 154 F.3d 788, 791 (8th Cir.1998) ("We may apply state law to arbitration agreements only to the extent that it applies to contracts in general."), cert. denied, 525 U.S. 1068, 119 S.Ct. 796, 142 L.Ed.2d 659 (1999).

Arbitrability questions must be considered with a "healthy regard for the federal policy favoring arbitration" and "any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration." Keymer, 169 F.3d at 504 (quoting Cone, 460 U.S. at 24-25, 103 S.Ct. 927). Quite simply, there is a general presumption of arbitrability under federal law. See Lyster, 239 F.3d at 945 (citing AT & T Technologies, Inc. v. Communications Workers of America, 475 U.S. 643, 650, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986)). "[A]rbitration should not be denied unless it may be said with positive assurance that the arbitration clause is not...