Indus. Access v. Praetorian Holdings Grp.
| Docket Number | 22-CV-626 JLS (MJR) |
| Decision Date | 05 June 2023 |
| Parties | INDUSTRIAL ACCESS INC., Plaintiff, v. PRAETORIAN HOLDINGS GROUP LLC, Defendant. |
| Court | U.S. District Court — Western District of New York |
REPORT AND RECOMMENDATION
This case has been referred to the undersigned pursuant to Section 636(b)(1) of Title 28 of the United States Code, by the Honorable John L. Sinatra, Jr. (Dkt. No. 16) Before the Court is defendant's motion to compel arbitration and to dismiss the complaint, or, in the alternative, to stay the lawsuit pending completion of the arbitration proceeding. (Dkt. No. 8) Also before the Court is plaintiff's cross-motion for a preliminary injunction to prevent the arbitration from proceeding. (Dkt. No. 12) For the following reasons, it is recommended that defendant's motion to compel arbitration and to dismiss and/or stay the lawsuit be denied, and that plaintiff's motion for a preliminary injunction enjoining the arbitration be granted.
On August 19, 2022, plaintiff Industrial Access, Inc. (“IA”) filed a complaint against defendant Praetorian Holdings Group (“PHG”) seeking breach of contract damages, a declaratory judgment, a preliminary as well as permanent injunction, and various other types of relief.[1] (Dkt. No. 1) It is alleged that on or about September 27, 2021, plaintiff and defendant entered into an agreement entitled the “Disassembly and Removal Agreement for Decommissioned Wind Turbine Components between Praetorian Holdings Group, LLC and Industrial Access, Inc. for the Cohocton and Steel Winds Repowering Project (the “Agreement”). Pursuant to the Agreement, PHG hired IA to dissemble and remove wind turbine generators as part of two large projects to upgrade wind power facilities throughout Erie County and Steuben County New York. (/d. at ¶15) IA alleges that PHG failed to manage and adequately prepare job sites in accordance with the parties' Agreement, resulting in substantial delays and additional costs to IA. (Id. at ¶¶18-19) IA alleges, for example, that over the course of at least 18 days between November 3 and December 9 2021, IA arrived at job sites to find that PHG failed to properly shut down certain wind turbine generators; failed to properly maintain access roads; and did not adequately prepare equipment needed by IA to perform the work described in the Agreement. (Id.) In each instance, IA incurred costs related to additional labor and equipment rental. (Id.) IA alleges that it timely completed the project, in accordance with the Agreement, with the understanding that it would be compensated for the delays caused by PHG. (Id. at ¶4) IA alleges that PHG failed to fully compensate IA under the terms of the Agreement. (Id.) IA then proceeded to file a number of mechanic's liens against PHG. (Id.)
The complaint indicates that on or about July 26, 2022, PHG filed a Demand for Arbitration, seeking to resolve the instant contractual dispute with IA in an arbitration proceeding before the American Arbitration Association (“AAA”). (Id. at¶22; Exh. B) PHG did not seek or obtain IA's agreement or consent to arbitrate the dispute before filing the arbitration demand. (Id.) Article 10 of the Agreement states as follows:
Disputes between the Parties shall be resolved in accordance with the terms of this contract and where thereunder the Parties refer matters to arbitration, the location of such proceedings shall be Cleveland, Ohio according to the rules established by the American Arbitration Association.
IA alleges that Article 10 of the Agreement does not require the arbitration of disputes. (Id. at ¶21) IA further alleges that it never consented to the arbitration of this dispute and that it continues to oppose the arbitration of the instant dispute, or any other dispute, with PHG. (Id.)
According to the complaint, IA now seeks a judgment declaring that the Agreement requires the consent of both parties to resolve the instant dispute through arbitration. (Id. at ¶¶25-26) IA also seeks an injunction restraining PHG from pursing this dispute, or any other dispute, with IA in arbitration, and requiring PHG to dismiss the current arbitration claim pending against IA. (Id. at¶27-31) IA's other causes of action, which seek monetary damages based on PHG's alleged failure to compensate IA pursuant to the Agreement, include breach of contract, unjust enrichment, and quantum meruit. (Id. at¶¶32-59)
On September 20, 2022, PHG filed a motion seeking to compel IA to arbitrate all claims alleged in the complaint. (Dkt. Nos. 8, 9) PHG further moved to dismiss IA's complaint in favor of arbitration pursuant to Federal Rule of Civil Procedure 12(b)(6) or, in the alternative, to stay the lawsuit pending resolution of the arbitration proceeding. (Id.) On November 18, 2022, IA filed a response in opposition to PHG's motion to compel arbitration and to dismiss and/or stay the lawsuit. (Dkt. No. 12) IA also cross-moved for a preliminary injunction enjoining PHG from pursuing any arbitration claims with respect to IA before the AAA. (Id.)
On November 1, 2022, PHG filed a reply in further support of its motion to compel arbitration and to dismiss and/or stay the lawsuit. (Dkt. No. 20) PHG filed a response in opposition to IA's motion for a preliminary injunction on November 11,2022. (Dkt. No. 22) On November 18, 2022, IA filed a reply in further support of its motion for a preliminary injunction. (Dkt. No. 23) The Court heard oral argument on November 22, 2022, at the conclusion of which it asked both parties for supplemental briefing. (Dkt. No. 24) PHG and IA filed supplemental briefs on December 16, 2022 (Dkt. Nos. 26, 27) and responses on January 6, 2022 (Dkt. Nos. 28, 29).[2]
The Federal Arbitration Act (“FAA”) provides that “[a] written provision in...a...contract...to settle by arbitration a controversy thereby arising out of [the] contract...shall be valid, irrevocable and enforceable.” 9 U.S.C. § 2. Pursuant to this statutory requirement, parties can seek to compel arbitration by petitioning a federal district court for an order directing that arbitration proceed in the manner provided for in their agreement. 9 U.S.C. § 4. In deciding motions to compel arbitration under the FAA, courts apply a “standard similar to that applicable for a motion for summary judgment” Bensadoun v. Jobe-Riat, 316 F.3d 171 (2d Cir. 2003), which requires consideration of “all relevant, admissible evidence submitted by the parties and contained in the pleadings, depositions, answers to interrogatories, and admissions on file, together with... affidavits.” Nicosia v. Amazon.com, Inc., 834 F.3d 220 (2d Cir. 2015); quoting Chamber v. Time Warner, Inc., 282 F.3d 147, 155 (2d Cir. 22). Just as it does when evaluating a typical summary judgment motion, the court must “draw all reasonable inferences in favor of the non-moving party.” Nicosia, 834 F.3d at 228.
According to the FAA and relevant case law, if, after considering the relevant evidence, the court finds that there is an issue of fact as to the making of the agreement for arbitration, then a trial is necessary. Bensadoun, 316 F.3d at 175; accord 9 U.S.C. § 4. However, “where the undisputed facts in the record require the matter of arbitrability to be decided against one side or the other as a matter of law, [the court] may rule on the basis of that legal issue and avoid the need for further court proceedings.” Wachovia Bank, Nat'l Ass'n v. VCG Special Opportunities Master Fund Ltd., 661 F.3d 164 (2d Cir. 2011) (internal quotations and citations omitted).[3]
When deciding whether a motion to compel arbitration should be granted, a court must first determine whether a valid agreement to arbitrate exists between the parties and, if so, whether the particular dispute sought to be arbitrated falls within the scope of the arbitration provision. Geneseo, Inc. v. T. Kakiuchi & Co., 815 F.2d 840 (2d Cir. 1987); JLM Indus., Inc. v. Stolt-Nielsen, 387 F.3d 163, 169 (2d Cir. 2004). Here, PHG maintains that Article 10 of the Agreement is a mandatory arbitration provision which requires that all disputes arising from the Agreement be submitted to arbitration, and which allows either party to unilaterally refer a dispute to arbitration. PHG argues, therefore, that IA is bound to resolve the instant dispute through arbitration. Conversely, it is IA's position that Article 10 permits disputes arising under the Agreement to proceed to arbitration only upon the consent of both parties. Further, IA did not and does not agree to resolve the instant dispute through arbitration. Thus, the Court is presented with a threshold disagreement as to whether a mandatory and enforceable agreement to arbitrate exists between PHG and IA.
Before reaching the merits of the parties' positions, however, the Court must first determine whether it should resolve the dispute at all. PHG maintains that issues of arbitrability are to be determined by an arbitrator and not the Court. Stated another way, PHG argues that it is the arbitrator who must make the threshold determination here as to whether PHG and IA are required to arbitrate this dispute under the Agreement. IA submits, however, that because there is a question or dispute as to whether an agreement to arbitrate exists in the first place, it is the Court, and not the arbitrator, who must make the threshold determination of arbitrability. For the following reasons, the Court agrees with IA.
The FAA creates a general presumption that courts should resolve the question of arbitrability. See Contec Corp. v. Remote...
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