Management Recruiters Intern., Inc. v. Bloor
| Decision Date | 19 November 1997 |
| Docket Number | No. 96-4198,96-4198 |
| Citation | 129 F.3d 851 |
| Parties | MANAGEMENT RECRUITERS INTERNATIONAL, INC., et al., Petitioners-Appellees, v. James W. BLOOR, Christine E. Bloor, and Health Care International, Inc., Respondents-Appellants. |
| Court | U.S. Court of Appeals — Sixth Circuit |
Michael K. Rode (briefed), Donald L. Goldman (argued & briefed), Management Recruiters, Intern., Inc., Cleveland, OH, for Petitioner-Appellee.
Howard E. Bundy (briefed), Howard R. Morrill (argued & briefed), Bundy & Morrill, Inc., Bellevue, WA, for Respondents-Appellants.
Before: NELSON, BOGGS and COLE, Circuit Judges.
James W. Bloor, along with his wife, Christine E. Bloor, and their company, Health Care International, Inc. (collectively, "Bloor"), appeals the decision of the district court granting the petition of Management Recruiters International, Inc. ("MRI"), to compel arbitration in Cleveland, Ohio. We agree with the district court that the franchise agreement between the parties, properly interpreted, reflects an agreement to arbitrate in Cleveland. We therefore affirm the decision of the district court.
Bloor spent the summer of 1995 investigating various franchise business opportunities. In October 1995, Bloor decided to sign a franchise agreement ("Agreement") with MRI, a firm whose franchisees provide personnel placement services in cities throughout the United States. Bloor, a resident of Washington State, intended to open an MRI franchise called Management Recruiters of Woodinville in Woodinville, Washington. MRI, which has its principal place of business in Cleveland, required Bloor or his designee to attend a 15-day franchise management training program in Cleveland. Based in part on MRI's alleged representations, Bloor believed at the time he entered into the Agreement that his franchise would achieve a positive cash flow by January 1996. As explained below, Bloor's franchise did not live up to expectations.
The Agreement contains two provisions relevant to Bloor's appeal. First, the Agreement requires that disputes relating to the Agreement be resolved through binding arbitration to be conducted in Cleveland:
16.1 ... [A]ll controversies, claims, disputes and matters in question arising out o[f], or relating to, this Agreement or the breach thereof, of [sic] the relations between the parties, shall be decided by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association. Either party may apply to the American Arbitration Association for a determination of the dispute as set forth in the notification thereof by the originating party. The parties agree that the arbitration shall take place in Cleveland, Ohio, and shall be governed by the law of the State of Ohio and the Federal Arbitration Act, and shall be final and judgment may be entered upon it in accordance with applicable law in any court having jurisdiction thereof, including a federal district court, pursuant to the Federal Arbitration Act....
Second, the Agreement contains a rider ("Rider"), included in the Agreement as originally signed, altering the above requirement to provide that arbitration will be conducted in Washington, but only to the extent that local arbitration is a valid requirement of the Washington Franchise Investment Protection Act, Wash. Rev.Code § 19.100 et seq. ("FIPA"), at the time of the arbitration:
The following is added to Section 28 of the Franchise Agreement, in place of any conflicting provisions:
28.2. The state in which the territory is located has the following provisions which may be applicable: Washington Franchise Investment Protection Act, 1976 Revised Code of Washington, Title 19, Chapter 19.100. The following provisions shall govern the relationship between MANAGEMENT RECRUITERS and FRANCHISEE, to the extent they are then valid requirements of the statute:
28.2.1. In any arbitration involving a franchise purchased in Washington, the arbitration site shall be either the state of Washington, or in a place mutually agreed upon at the time of the arbitration, or as determined by the arbitrator....
(Emphasis added.)
By the spring of 1996, Bloor realized that his MRI franchise was not going to be as lucrative as he had hoped. On May 31, 1996, he filed suit against MRI in the Superior Court of King County, Washington, alleging a variety of tort and statutory claims including fraudulent misrepresentation, violations of the Federal Trade Commission Franchise and Business Opportunity Rule, and violations of FIPA. MRI removed the case to the United States District Court for the Western District of Washington and, with the parties' agreement, that court stayed the action pending arbitration. On August 9, 1996, MRI filed a petition in the United States District Court for the Northern District of Ohio requesting an order directing Bloor to submit his claims to arbitration in Cleveland. On August 13, 1996, Bloor filed an arbitration demand with the American Arbitration Association in Seattle. Some time later, Bloor apparently also filed a petition to compel arbitration in the federal district court for the Western District of Washington.
In the district court, Bloor advanced two arguments in opposition to MRI's petition to compel arbitration in Cleveland: first, that Bloor's filing with the American Arbitration Association in Seattle rendered the petition moot; and second, that the parties agreed to arbitrate in Washington and that the district court in Ohio therefore was without jurisdiction to grant MRI's petition. The district court rejected these arguments. The court initially noted that the requirements for personal jurisdiction and for federal subject matter jurisdiction premised on diversity of citizenship were satisfied. The court then turned to the question of jurisdiction under the Federal Arbitration Act ("FAA"). Recognizing that, under Section 4 of the FAA, only a district court in the state where the parties agreed to arbitrate has jurisdiction to order arbitration, the district court noted that the effectiveness of the Washington forum-selection clause contained in the Rider depends upon whether FIPA contains a valid in-state arbitration requirement. The district court examined the provisions of FIPA, found "no statute requiring that the location of the arbitration be determined in the manner provided in the rider," and therefore concluded that it had jurisdiction to rule on MRI's petition. Because arbitration is mandatory under the Agreement, the district court then granted MRI's petition and ordered the parties to submit their dispute to arbitration in Cleveland. Bloor now appeals the district court's order.
The question presented by Bloor's appeal is whether the district court had jurisdiction to rule on MRI's petition to compel arbitration. To resolve this question, we must determine whether the parties agreed to arbitrate in Cleveland, as MRI contends, or whether the language of the Rider effectively changed the agreed arbitration forum from Cleveland to Washington State, as urged by Bloor. Section 4 of the FAA provides that:
[A] party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration may petition any United States district court which, save for such agreement, would have jurisdiction under Title 28, in a civil action or in admiralty of the subject matter of a suit arising out of the controversy between the parties, for an order directing that such arbitration proceed in the manner provided for in such agreement.
9 U.S.C. § 4. Section 4 further requires that the arbitration proceedings themselves "shall be within the district in which the petition for an order directing such arbitration is filed." We agree with the majority of courts that have recognized that, where the parties have agreed to arbitrate in a particular forum, only a district court in that forum has jurisdiction to compel arbitration pursuant to Section 4. See, e.g., Merrill Lynch, Pierce, Fenner & Smith v. Lauer, 49 F.3d 323, 327 (7th Cir.1995); Alpert v. Alphagraphics Franchising, Inc., 731 F.Supp. 685, 689 (D.N.J.1990); Management Recruiters of Albany, Inc. v. Management Recruiters Int'l, Inc., 643 F.Supp. 750, 753 (N.D.N.Y.1986). "Otherwise, the clause of [Section] 4 mandating that the arbitration and the order to compel issue from the same district would be meaningless." Lauer, 49 F.3d at 327.
Here, the Agreement contains two forum-selection provisions. The first provision, contained in Section 16.1 of the Agreement, requires the parties to submit their disputes to an arbitrator in Cleveland. The second provision, contained in the Rider, requires the parties to submit their disputes to arbitration in the state of Washington, but only if such "in-state" arbitration is a valid requirement of FIPA. Like the district court, we conclude, based on our examination of FIPA, that there is no express statutory provision in FIPA requiring out-of-state franchisors such as MRI to agree to arbitrate their disputes with Washington residents within Washington State. Indeed, FIPA contains a lengthy provision requiring franchisors to deal with franchisees "in good faith" and setting forth an extensive list of requirements governing franchise relationships, in which an in-state arbitration requirement is notable by its absence. See Wash. Rev.Code § 19.100.180.
Bloor does not appear to disagree that the text of FIPA itself contains no provision requiring MRI to arbitrate its disputes with Bloor in Washington. Bloor argues, however, that an advisory opinion issued by a Washington administrative official interpreting the "good faith" language of FIPA imports such a requirement into the statutory text. The advisory opinion, issued by the Washington State Securities Administrator, states:
[Wash. Rev.Code § ] 19.100.180(1) requires that the parties to a franchise...
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