Detroit Edison v. Burlington N. and Santa Fe Ry.
| Decision Date | 12 June 2006 |
| Docket Number | No. 05-74873.,05-74873. |
| Citation | 442 F.Supp.2d 387 |
| Parties | The DETROIT EDISON COMPANY, Midwest Energy Resources Company, DTE Coal Services, Inc., Plaintiffs, v. The BURLINGTON NORTHERN AND SANTA FE RAILWAY COMPANY, Defendant. |
| Court | U.S. District Court — Eastern District of Michigan |
Christina G. Sartwell, Thomas F. Lillard, Hunton & Williams, Dallas, TX, Eric S. Rosenthal, Barris, Sott, Detroit, MI, for Plaintiffs.
Linda S. Stein, Samuel M. Sipe, Jr., Steptoe & Johnson, Washington, DC, Mary C. O'Donnell, Durkin, McDonnell, Detroit, MI, for Defendant.
On December 23, 2005, Plaintiffs filed this action against Defendant BNSF Railway seeking declaratory relief and damages for their claims of breach of contract, breach of contract based on custom, breach of implied covenant of good faith and fair dealing, and promissory estoppel. Presently before the Court are Defendant's Motion to Stay Court Proceedings and to Refer Claims to Arbitration and Plaintiffs' Motion for Leave to File First Amended Complaint. The Court heard oral arguments on these motions on May 4, 2006.
Plaintiffs Detroit Edison and its corporate affiliates, Midwest Energy Resources Company, and DTE Coal Services, Inc., use rail services to move coal to industrial coal consumers and electric generation stations. Plaintiff Detroit Edison and Defendant BNSF entered into a Coal Transportation Agreement, BNSF-C-12152 (the "Agreement"), whereby BNSF agreed to transport coal from mines in Wyoming and Montana to the upper Midwest and for interchange to other rail carriers at Chicago, Illinois.
In their lawsuit, Plaintiffs allege that Defendant is obligated by the Agreement to furnish locomotives for the movement of Detroit Edison trains that remain with the coal trains and "run through"1 beyond the point where BNSF interchanges the trains with other rail carriers. (Compl.¶ 33). In addition, Plaintiffs contend that BNSF failed to fulfill its obligations with respect to interchange trains with other rail carriers at Chicago. (Compl.¶ 36).
The Agreement contains the following provision:
If a question or controversy arises between the parties concerning the observance, performance, interpretation, administration or implementation of any of the terms, provisions, or conditions contained herein or the rights or obligations of either party under this Agreement, such question or controversy shall in the first instance be the subject of a meeting between the parties to negotiate a resolution of such dispute. If, within thirty (30) days after the meeting, the parties have not negotiated a resolution or mutually extended the period of negotiation, either party may seek resolution of the question or controversy pursuant to binding arbitration.
(Def.'s Mot. Ex.. 2, redacted Agreement § 9 at 40).
On February 15, 2006, Defendant filed a demand for arbitration to address the following issues: (1) whether the Agreement imposes an obligation upon BNSF to provide run-through locomotive power beyond the Interchange; and (2) the meaning of "Interchange" as defined in the Agreement. (Def.'s Mot. Ex. 3).
On February 23, 2006, Defendant filed its Motion to Stay Court Proceedings and to Refer Claims to Arbitration.
On March 17, 2006, Plaintiffs filed a Response in Opposition to Defendant's Motion and Motion for Leave to Amend Complaint.
Defendant moves to refer Plaintiffs' claims to arbitration pursuant to the Federal Arbitration Act ("FAA"), 9 U.S.C. §§ 2 and 3. The FAA requires arbitration if: (1) there is an agreement with a nexus to interstate commerce that contains an arbitration clause, see 9 U.S.C. § 2; and (2) the arbitration clause covers the issues raised in the complaint, see 9 U.S.C. § 3. Section 4 of the FAA gives the court the authority to issue "an order directing that such arbitration proceed in the manner provided for in such agreement." 9 U.S.C. § 4.
In adopting the FAA, Congress intended to create "a liberal federal policy favoring arbitration agreements." Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 941, 74 L.Ed.2d 765 (1983). Any doubts concerning whether arbitration is required are to be resolved in favor of arbitration. Id. at 24-25, 103 S.Ct. at 941. The Sixth Circuit has found:
When a contract contains an arbitration clause, there is a general presumption of arbitrability, and any doubts are to be resolved in favor of arbitration "unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute". . . Where the arbitration clause is broad, only an express provision excluding a specific dispute, or "the most forceful evidence of a purpose to exclude the claim from arbitration," will remove the dispute from consideration by the arbitrators.
Highlands Wellmont Health Network, Inc. v. John Deere Health Plan, Inc., 350 F.3d 568, 576-77 (6th Cir.2003) (citing AT & T Techs., Inc. v. Communications Workers of Am., 475 U.S. 643, 650, 106 S.Ct. 1415, 1419, 89 L.Ed.2d 648 (1986)).
Plaintiff argues that the Court should deny Defendant's Motion because the Agreement contains a permissive arbitration clause, which states that the parties "may seek resolution of the question or controversy pursuant to binding arbitration." (Agreement § 9 at 40 (emphasis added)). According to Plaintiff, the use of the word "may" in the arbitration provision merely gives the parties the option of arbitrating the dispute, without foreclosing resolution of the dispute through litigation. The Court disagrees.
A number of courts have found that the word "may" in arbitration provisions does not make arbitration optional. See Mollett v. City of Taylor, 197 Mich.App. 328, 339, 494 N.W.2d 832, 837-38 (1992) (); see also Republic Steel Corp. v. Maddox, 379 U.S. 650, 658-59, 85 S.Ct. 614, 619, 13 L.Ed.2d 580 (1965) ( ); Allis-Chalmers Corp. v. Lueck, 471 U.S. 202, 204 n. 1, 105 S.Ct. 1904, 1908 n. 1, 85 L.Ed.2d 206 (1985) ("The use of the permissive
In addition, in analyzing contracts subject to the FAA, two Courts of Appeals have concluded that use of the word "may" in an arbitration provision gives a party the option of arbitrating or doing nothing. United States v. Bankers Ins. Co., 245 F.3d 315, 320-21 (4th Cir.2001) (); Am. Italian Pasta Co. v. Austin Co., 914 F.2d 1103, 1104 (8th Cir.1990) (same).2 The Court agrees that the use of the word "may" in the Agreement's arbitration provision gives the parties the option of arbitrating or doing nothing. Therefore, the Court believes that the arbitration provision is mandatory, provided sections 2 and 3 of the FAA are satisfied.
First, in this case, there is clearly an agreement with a nexus to interstate commerce that contains an arbitration clause. The Agreement governs the transportation of coal in trains across state lines. Therefore, section 2 of the FAA is satisfied.
Second, the Court believes that the arbitration clause covers all five causes of action raised in Plaintiffs' complaint, and therefore, section 3 of the FAA is satisfied. Plaintiffs first cause of action is a request for declaratory judgment seeking declarations that (1) the Agreement imposes an obligation on BNSF to provide runthrough power, (2) BNSF's service standard in section 5(E)(1) of the Agreement has a particular meaning, and (3) the term "Interchange," in the Agreement has certain meanings. (Compl.¶¶ 32-33, 35-38). Plaintiffs second cause of action is a breach of contract claim alleging that BNSF breached its Agreement with Plaintiffs. (Compl.¶¶ 39-45). Both the declaratory judgment and breach of contract claims concern the "interpretation ... of the terms" of the Agreement and/or "the rights or obligations" of BNSF. (See Agreement § 9 at 40). Thus, these counts are clearly within the scope of the arbitration provision.3
In addition, Plaintiffs' third, fourth, and fifth causes of action are also subject to the arbitration provision. In Genesco, Inc. v. T. Kakiuchi & Co., Ltd., 815 F.2d 840 (2d Cir.1987), the Second Circuit held that "[i]f the allegations underlying the claims `touch matters' covered by the parties' ... agreements, then those claims must be arbitrated, whatever the legal labels attached to them." Id. at 846 (citing Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth Inc., 473 U.S. 614, 625 n. 13, 105 S.Ct. 3346, 3353 n. 13, 87 L.Ed.2d 444 (1985)). The Second Circuit found that "the allegations of fraud, unfair competition and unjust enrichment claims were all subject to arbitration because they were predicated on and `not wholly independent of" " the contract. Id. at 854-56. The Sixth Circuit, following Genesco, has found that "[e]ven real torts can be covered by arbitration clauses `[i]f the allegations underlying the claims `touch matters' covered by the [agreement].'" Fazio v. Lehman Bros., Inc., 340 F.3d 386, 395 (6th Cir. 2003). In Fazio, the Sixth Circuit...
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