Precision Press, Inc. v. Mlp U.S.A., Inc.
| Decision Date | 01 June 2009 |
| Docket Number | No. C09-4005-MWB.,C09-4005-MWB. |
| Citation | 620 F.Supp.2d 981 |
| Parties | PRECISION PRESS, INC., d/b/a Anderson Brothers Printing Company, Plaintiff, v. MLP U.S.A., INC., Defendant. |
| Court | U.S. District Court — Northern District of Iowa |
Jeff W. Wright, Sioux City, IA, for Plaintiff.
Gary D. Santella, Gary Vist, Masuda, Funai, Eifert & Mitchell, Ltd., Chicago, IL, Daniel L. Hartnett, Crary-Huff-Inkster-Hecht-Sheehan-Ringgenberg-Hartnett-Storm, Sioux City, IA, for Defendant.
TABLE OF CONTENTS
I. INTRODUCTION ........................................................... 984
A Factual Background ................................................... 984
B. Procedural Background ............................................... 985
II. LEGAL ANALYSIS ......................................................... 986
A. Rule 12(b)(1) Challenges to Jurisdiction ............................ 986
B. General Principles Governing Arbitration ............................ 988
C. Analysis ............................................................ 989
1. Does state or federal law apply? ................................. 989
2. Does the FAA apply? .............................................. 992
3. Did the parties agree to arbitrate this dispute? ................. 993
4. Dismissal or stay? ............................................... 995
III. CONCLUSION ............................................................. 996
This case comes before the court on defendant MLP U.S.A., Inc.'s ("MLP") pre-answer Federal Rule of Civil Procedure 12(b)(1) Motion To Dismiss, or Alternatively, To Stay Pending Arbitration (docket no. 11). Therefore, the following factual background is based on the allegations in the Complaint and, where necessary, such other facts, disputed and undisputed, pertinent to the present controversy as appear in the parties' briefing of defendant MLP's Motion To Dismiss, or Alternatively, To Stay Pending Arbitration. The present record does not, however, permit the court to make any findings to resolve factual disputes.1
Plaintiff Precision Press, Inc., d/b/a Anderson Brothers Printing Company ("Anderson Brothers"), is an Iowa corporation with its principle place of business in Sioux City, Iowa. Anderson Brothers is in the business of printing paper products for customers throughout the upper Midwest. Defendant MLP is a Delaware corporation with its principle place of business in Lincolnshire, Illinois. MLP is in the business of selling and servicing commercial sheetfed, newspaper, and web offset presses manufactured by Mitsubishi Heavy Industries, Ltd. ("Mitsubishi").
Early in 2007, Anderson Brothers began searching for a "perfecting" press which would permit it to print and apply a UV coating to both sides of a sheet of paper in a single pass through the press, thereby allowing Anderson Brothers to increase its production capacity. Upon learning that Anderson Brothers was in the market for a "perfecting" press, Mitsubishi solicited Anderson Brothers, claiming to have a printing press which would meet Anderson Brothers's requirements. Following a demonstration, Anderson Brothers agreed to purchase a Mitsubishi 3000R-8CC-XXX Press from MLP.
On March 26, 2008, Anderson Brothers signed a Sales Agreement drafted by MLP. In its signed copy, however, Anderson Brothers made a number of handwritten changes to the contract. One of the handwritten changes, in pink highlighter, was a "+ Iowa" notation at the end of paragraph 13(g).2 Based on these handwritten changes, MLP drafted Amendment #1, dated April 18, 2008. The handwritten notation "+ Iowa" at the end of paragraph 13(g), however, was not added to either the Sales Agreement or Amendment # 1. On April 23, 2008, MLP executed both the Sales Agreement as well as Amendment # 1. Anderson Brothers executed Amendment # 1 on the same date.
The Sales Agreement contains an arbitration clause which provides:
Except for Seller's right to seek collection of payments due or replevin of the Equipment referenced herein in accordance with its security interest in the event of Purchaser's failure to provide for return of the same in violation of this Agreement, all disputes and claims arising out of or in any way related to this Agreement, or arising in connection with this Agreement and all disputes and claims regarding any alleged defects in the Equipment shall be resolved exclusively by final and binding arbitration conducted in Chicago, Illinois, pursuant to the American Arbitration Association's Model Commercial Arbitration Rules. The arbitration shall be before a panel of three (3) arbitrators. The arbitration opinion and award shall be final and binding upon the parties and enforceable by any court of competent jurisdiction. Seller and Purchaser shall share equally all costs of arbitration (except their own attorneys' fees).
Sales Agreement at ¶ 12 (Defendant's Ex. A). Among the Sales Agreement's miscellaneous provisions is a severability clause, which states: "If any term of condition or part of this SALES AGREEMENT is held invalid, the remaining terms and conditions of this SALES AGREEMENT shall not be affected thereby." Sales Agreement at ¶ 13(b) (Defendant's Ex. A). Also found among the Sales Agreement's miscellaneous provisions is a choice of law clause, which provides that: "This Contract Shall be construed in accordance with the laws of the state of Illinois." Sales Agreement at ¶ 13(g) (Defendant's Ex. A).
On July 9, 2008, MLP began installation of the Mitsubishi Diamond 3000R press. Installation was completed in early September 2008, and training commenced on September 5, 2008. Anderson Brothers alleges that the Mitsubishi trainers had difficulties with the press immediately, including continuous mechanical issues, unacceptable color, unacceptable registration, unacceptable consistency and excessive curl. Anderson Brothers also alleges that it told MLP's sales personnel about the problems it was experiencing with the Mitsubishi Diamond 3000R press and demanded that the problems be remedied by the end of September 2008, but MLP failed to do so. Anderson Brothers further alleges that it has experienced continuous problems with the press, including the following: uncontrollable ink and water balance; color variation, scumming and toning issues; blackening of water during operation; front, side and sheet fit registration problems; curling; paper being thrown into rollers; sheets being ripped off on the blankets required for printing during operation; ink misting and ink piling up on the metering roller; failure of the UV lights to perform on a consistent basis or dry ink in an appropriate fashion; errors with the drive motor; errors on the sheet scanner; excessive make ready time and changeovers from one job to the next; inability to run the press at the rated speed of 11,000 sheets per hour in the perfecting mode.
During the week of November 8, 2008, Anderson Brothers permitted MLP technicians to attempt to remedy the problems it was having with the press. Anderson Brothers alleges that MLP has been unable to resolve the problems. On November 28, 2008, Anderson Brothers gave timely notice to MLP that it was rejecting the press because of its alleged non-conformity with the representations made by MLP and the terms of the Sales Agreement.
Anderson Brothers filed the present action on January 20, 2009, asserting diversity jurisdiction and sufficient amount in controversy pursuant to 28 U.S.C. § 1332(a). Count I of Anderson Brothers's Complaint seeks a declaratory judgment, pursuant to 28 U.S.C. § 2201, that the Sales Agreement is null and void for failure of its essential purpose. In Count II, Anderson Brothers asserts a claim for breach of contract, alleging that the Mitsubishi Diamond 3000R press did not perform as represented and that MLP failed to remedy the press's performance and mechanical problems.
Before answering Anderson Brothers's Complaint, MLP filed its Motion To Dismiss, or Alternatively, To Stay Pending Arbitration. In its motion, MLP asserts that given the arbitration clause in the Sales Agreement, this court lacks subject matter jurisdiction and requests dismissal of this case pursuant to Federal Rule of Civil Procedure 12(b)(1). In the alternative, MLP requests that the court issue an order compelling arbitration and staying this action pending completion of the arbitration proceedings. Anderson Brothers filed a timely resistance to MLP's motion in which it asserts, inter alia, that the Federal Arbitration Act ("FAA") does not govern this dispute and that the current case falls outside the scope of the Sales Agreement's arbitration clause. MLP has, in turn, filed a timely reply brief.
The court held telephonic oral arguments on MLP's motion on May 26, 2009. At the oral arguments, plaintiff Anderson Brothers was represented by Jeff W. Wright and Jill A. Finken, who argued, of Heidman Law Firm, Sioux City, Iowa. Defendant MLP was represented by Gary D. Santella, who argued, of Masuda, Funai, Eifert & Mitchell, Ltd., Chicago, Illinois, and Daniel Hartnett of Crary, Huff, Inkster, Sheehan, Ringgenberg, Hartnett & Storm, P.C., Sioux City, Iowa. Counsel were exceptionally well prepared and made spirited and informative arguments on the issues which were of substantial assistance to the court in resolving the pending matter. The court turns first to the standards applicable to motions to dismiss and, then, to the legal analysis of the merits of defendant MLP's motion, namely whether there is a binding agreement to arbitrate that requires a dismissal or stay of this action.
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