Mississippi Fleet Card, L.L.C. v. Bilstat, Inc.

• Decision Date: 19 December 2001
• Docket Number: No. CIV.A. 3:01CV352BN.,CIV.A. 3:01CV352BN.
• Citation: 175 F.Supp.2d 894
• Court: U.S. District Court — Southern District of Mississippi
• Parties: MISSISSIPPI FLEET CARD, L.L.C.; Buffalo Services, Inc.; Burns & Burns, Inc.; Cantron Oil, Inc.; Clark Petroleum; Dutch Oil Company, Inc.; Gresham Petroleum Co.; Litco Petroleum, Inc.; Maples Gas Company, Inc.; Pine Belt Oil Co., Inc.; Ramco, Inc.; Sayle Oil Company, Inc.; and Waring Oil Co., Plaintiffs, v. BILSTAT, INC.; Edward Abou-Fadel; Stephen J. Hatch; Bilstat Holding Co.; Bilstat Enterprises Corporation; Diversified Fleet Sales, Inc.; and John Does 1-10, Defendants.

175 F.Supp.2d 894

MISSISSIPPI FLEET CARD, L.L.C.; Buffalo Services, Inc.; Burns & Burns, Inc.; Cantron Oil, Inc.; Clark Petroleum; Dutch Oil Company, Inc.; Gresham Petroleum Co.; Litco Petroleum, Inc.; Maples Gas Company, Inc.; Pine Belt Oil Co., Inc.; Ramco, Inc.; Sayle Oil Company, Inc.; and Waring Oil Co., Plaintiffs, v. BILSTAT, INC.; Edward Abou-Fadel; Stephen J. Hatch; Bilstat Holding Co.; Bilstat Enterprises Corporation; Diversified Fleet Sales, Inc.; and John Does 1-10, Defendants.

No. CIV.A. 3:01CV352BN.

United States District Court, S.D. Mississippi, Jackson Division.

December 19, 2001.

COPYRIGHT MATERIAL OMITTED

John W. Robinson, III, Benjamin L. Robinson, Phelps Dunbar, Jackson, MS, for plaintiffs.

Ricky G. Luke, Jack Robinson Dodson, III, Craig, Hester, Luke & Dodson, P.A., Jackson, MS, David A. Fettner, Houston, TX, for defendants.

OPINION AND ORDER

BARBOUR, District Judge.

This cause is before the Court on the Motion of the Defendants to Dismiss and Compel Arbitration, or alternatively, to Stay Proceedings Pending Arbitration.¹ The Court has considered the Motion, Response, Rebuttal, attachments to each, and supporting and opposing authority and finds that the Motion should be granted in part, and denied in part.

I. Factual Background and Procedural History

In December of 1995, Plaintiff Mississippi Fleet Card, L.L.C. ("MFC") entered into a Development Agreement with Defendant BilStat, Inc. ("BilStat") whereby the latter agreed to design, develop and implement a credit card system by which customers of MFC Members could purchase goods and services on credit.² On May, 18, 1997, upon completion of all phases of the Development Agreement, MFC and BilStat entered into a Processing Agreement which contains an arbitration clause that is the subject of the pending motion. See Motion to Dismiss, et al., Exhibit 1, ¶ 50. Under the terms of the Processing Agreement BilStat issued credit cards, called FleetSmart Cards, to qualifying customers of MFC Members. BilStat was to then collect data regarding purchases made with the FleetSmart Cards, bill customers for the charges, collect and direct cardholder payments to a "locked box" owned by MFC, determine which MFC Members were entitled to payment from the funds collected, and disburse payments from the locked box into the MFC Member accounts. After entering the Processing Agreement, MFC agreed to allow BilStat to disburse payments from the MFC locked box into an account owned by BilStat to facilitate the payment for goods and services purchased with the FleetSmart Card at locations that were not owned by MFC Members.

MFC alleges that in 1999 it began receiving inquiries from the MFC Members regarding the financial reports and other services provided by BilStat. MFC also alleges that upon investigation of these inquiries, it discovered that payments received into the MFC locked box had not been distributed to MFC Members and that BilStat had disbursed payments for its own benefit and to its other clients. In total, MFC alleges that BilStat misappropriated at least $2,000,000.00 from the MFC locked box. MFC also alleges that BilStat, contrary to the terms of the Processing Agreement, refused to provide it access to the credit card system, including information regarding FleetSmart cardholders and their accounts, source code materials, and the computer software necessary for MFC to establish and operate its own credit card system.

On August 31, 2000, MFC provided BilStat written notice of its intent to terminate the Processing Agreement unless BilStat cured all of its alleged breaches of that agreement. The termination notice became effective on October 1, 2000. MFC alleges that because BilStat refused it access to the FleetSmart credit card system, it negotiated a separate agreement whereby BilStat would continue to process the credit-related information but MFC would direct disbursements from the locked box after review of the information it was provided. This arrangement continued until on or about April 1, 2001, at which time MFC stopped use of the services provided by BilStat, and requested BilStat to relinquish all information necessary for MFC to assume FleetSmart credit-related services, including the names and relevant account information of the cardholders. MFC alleges that BilStat refused to relinquish the requested information thereby again breaching the Processing and Development Agreements.

On May 9, 2001, Plaintiffs filed a complaint in this Court against the named Defendants on the basis of diversity of citizenship jurisdiction. For the purpose of diversity analysis, Plaintiffs are all corporate citizens of, and have their principal places of business in the State of Mississippi. Defendants BilStat, BilStat Enterprises Corporation, BilStat Holding Company, and Diversified Fleet Sales, Inc. are all corporate citizens of, and have their principal places of business in the State of Texas. Defendants Edward Abou-Fadel ("Abou-Fadel") and Stephen J. Hatch ("Hatch") are citizens of the State of Texas. Therefore, the Court finds that the complete diversity requirement of 28 U.S.C. § 1332 is satisfied. The Court additionally finds, as the complaint sets forth damages in excess of $2,000,000.00, that the amount in controversy requirement is likewise satisfied. Accordingly, the Court finds that it may properly assert subject matter jurisdiction over this case pursuant to 28 U.S.C. § 1332.

Through the complaint, MFC seeks multiple declaratory judgments from the Court, including that BilStat materially breached the terms of the Processing Agreement, that BilStat failed to cure the alleged breaches, and that the conduct of BilStat constituted an actual and/or constructive termination of the Processing Agreement thereby forfeiting its right to enforce its terms, including the arbitration provision.³ MFC seeks an injunction "prohibiting BilStat from disclosing, using, converting, selling, or duplicating MFC's proprietary and confidential information ... [and] requiring BilStat to return all of MFC's proprietary and confidential information to MFC." See Complaint, Count II, ¶ 126. MFC also asserts that "BilStat should be ordered to provide an accounting to MFC for all monies transferred, deposited or paid into or transferred or disbursed from the MFC locked box." See Id. Count III, ¶ 128. Finally, MFC alleges, as set forth by the factual allegations contained in the complaint, claims of: (1) breach of contract, (2) breach of implied covenant of good faith and fair dealing, (3) bad faith breach of contract, (4) willful, malicious, and intentional breach of contract, (5) breach of fiduciary duty, (6) fraud, (7) conversion, (8) willful, malicious, and intentional conduct, (9) gross negligence, (10) negligence, (11) civil conspiracy and violation of the Racketeer Influenced and Corrupt Organization Act ("RICO"), codified at 18 U.S.C. § 1962 et seq., (12) alter ego, and (13) unjust enrichment. See Id. Counts IV through XVI, ¶¶ 129-161. Defendants have moved to dismiss and compel arbitration on the claims alleged in the complaint or, in the alternative, to stay proceedings pending arbitration.

II. Analysis

A. Are the Claims of the Plaintiffs Subject to Arbitration?

1. MFC versus BilStat

Section 2 of the Federal Arbitration Act ("FAA") provides that "[a] written provision in ... a contract[, evidencing a transaction involving commerce,] ... to settle by arbitration a controversy thereafter arising out of such contract ... shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. The first inquiry of the Court is whether the Processing Agreement, which contains the subject arbitration provision, is a "contract evidencing a transaction involving commerce." Id. In this regard, the United States Supreme Court has held that under the FAA, "control over interstate commerce reaches not only the actual physical interstate shipment of goods but also [extends to] contracts relating to interstate commerce." Allied-Bruce Terminix Companies, Inc. v. Dobson, 513 U.S. at 273-74, 115 S.Ct. 834, 130 L.Ed.2d 753 (1995). The Court finds that as the subject Processing Agreement and attendant arbitration clause was entered into, and was to be performed by, citizens of different states, the Processing Agreement does involve interstate commerce as that term is defined by FAA precedent. See e.g. Id. at 281, 115 S.Ct. 834 (indicating that the term "involving commerce" should be construed liberally as meaning "affecting commerce."). See also Del E. Webb Constr. v. Richardson Hosp. Auth., 823 F.2d 145, 147 (5th Cir.1987) (holding that "[c]itizens of different states engaged in performance of contractual operations in one of those states are engaged in a contract involving commerce under the FAA." (citations omitted)). The Court, therefore, finds that the Processing Agreement, which contains the subject arbitration clause, is a contract involving interstate commerce which may be enforced under the FAA.

The Court must next determine whether the parties agreed to arbitrate their disputes. See Harvey v. Joyce, 199 F.3d 790, 793 (5th Cir.2000). In this regard, the intent of the parties is determined by employing the state law rules of contract construction. See Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985). "Any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability." Moses H. Cone Memorial Hosp. v. Mercury Const., 460 U.S. 1, 24, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). As explained by the United States Court of Appeals for the Fifth Circuit: "A finding that the scope of the arbitration clause is vague does not automatically catapult the...