Snap-on Tools Corp. v. Mason, SNAP-ON

• Citation: 18 F.3d 1261
• Decision Date: 15 April 1994
• Docket Number: SNAP-ON,No. 93-7317,93-7317
• Parties: TOOLS CORPORATION, Plaintiff-Appellant, v. Barney MASON, Jr. and Sandra Mason, Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

Page 1261

18 F.3d 1261

SNAP-ON TOOLS CORPORATION, Plaintiff-Appellant, v. Barney MASON, Jr. and Sandra Mason, Defendants-Appellees.

No. 93-7317.

United States Court of Appeals, Fifth Circuit.

April 15, 1994.

Stacy Obenhaus, Harold H. Walker, Jr., Gardere & Wynne, Dallas, TX, James F. Stern, Michael Bowen, Foley & Lardner, Milwaukee, WI, for plaintiff-appellant.

Frank W. Mitchell, G.P. Hardy, III, Houston, TX, for defendants-appellees.

Appeal from the United States District Court for the Southern District of Texas.

Before HIGGINBOTHAM and WIENER, Circuit Judges, and KAUFMAN, ^* District Judge.

FRANK A. KAUFMAN, District Judge:

On January 24, 1989, Barney Mason entered into a written Dealer Agreement with Snap-On, pursuant to which Mason became a non-exclusive distributor of various Snap-on tools. The Dealer Agreement includes the following provision governing arbitration of disputes between the parties:

RESOLUTION OF DISPUTES--ARBITRATION. Any controversy or dispute arising out of or relating to this Agreement, or breach thereof including, but not limited to, any claim by the Dealer relating to termination of this Agreement by the Company or any other claim against an employee, officer or director of the Company, shall be submitted to final and binding arbitration as the sole and exclusive remedy for any such controversy or dispute. Any request for arbitration shall be filed in writing within six (6) months following the alleged breach; otherwise, the right to any remedy shall be deemed forever waived and lost.

On September 9, 1992, Barney and his wife, Sandra Mason, served Snap-on with a petition which they had filed in the District Court for Matagorda County, Texas, against Snap-on and four of its present or former employees. Snap-on is a Delaware corporation with its principal place of business in Wisconsin; the four individual-employee defendants and the Masons are all citizens of Texas. In the state court complaint, the Masons allege fraudulent inducement into the dealership contract, fraud during the executory time of the contract, breach of fiduciary duty, and negligent and intentional infliction of emotional distress.

In response to the state court complaint Snap-on and its co-defendants filed a general denial and a motion to stay proceedings in the state court pending arbitration. ¹ On October 5, 1992, Snap-on sent a written demand for arbitration to the Masons to which the Masons did not respond. On February 12, 1993, Snap-on filed a petition and complaint in the United States District Court for the Southern District of Texas to compel arbitration pursuant to section 4 of the Federal Arbitration Act ("FAA" or "the Act"), 9 U.S.C. Sec. 4. ² Snap-on invoked the diversity jurisdiction of the district court on the basis of complete diversity of citizenship between Snap-on and the Masons. The four non-diverse co-defendants in the state court action are not plaintiffs in the federal court action and are not parties to the arbitration agreement.

The Masons responded to the petition to compel arbitration with a motion to dismiss. On April 30, 1993, the district court granted the Masons' motion to dismiss on abstention grounds. ³ The district court gave primarily five reasons for its grant of the motion, stating that: (1) in order to determine whether Snap-on is entitled to arbitration the court would have to hold a trial, a course of action it did not want to pursue; (2) there was no reason why Snap-on should not pursue its arbitration claim in the state court; (3) Snap-on had likely filed the motion to compel arbitration because it had missed the thirty day deadline for filing a petition of removal; (4) a plaintiff's choice of forum is entitled to deference; and (5) Snap-on was motivated to file its federal claim because it feared the pro-plaintiff orientation of the state court. Snap-on appeals the district court's dismissal.

"In enacting the Federal Arbitration Act, Congress declared a national policy in favor of arbitration," Municipal Energy Agency of Mississippi v. Big Rivers Elec. Corp., 804 F.2d 338, 342 (5th Cir.1986) (citing Southland Corp. v. Keating, 465 U.S. 1, 104 S.Ct. 852, 79 L.Ed.2d 1 (1984)). "[C]ongress' clear intent, in the Arbitration Act, [was] to move the parties to an arbitrable dispute out of court and into arbitration as quickly and easily as possible." Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 22, 103 S.Ct. 927, 940, 74 L.Ed.2d 765 (1983).

In its opinion granting the motion to dismiss, the district court noted the federal policy in favor of arbitration, but declined nonetheless to enforce the arbitration agreement. "We review de novo the district court's decision not to compel arbitration." Catholic Diocese of Brownsville v. A.G. Edwards & Sons, Inc., 919 F.2d 1054, 1056 (5th Cir.1990).

The district court's decision conflicts with the Supreme Court's decision in Moses H. Cone, 460 U.S. 1, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). In Moses H. Cone, a hospital filed a state court suit against a construction contractor and an architect raising a number of claims against the contractor arising out of the construction contract between the hospital and the contractor and also contending that the contractor had, by not proceeding timely, lost its right to arbitrate. That contract contained a broadly worded arbitration provision. In the state court suit, the hospital included several claims against an architect who was involved in the construction project, but who was not a party to the disputed contract. The contractor mailed a demand for arbitration to the hospital the same day the hospital's complaint was served upon the contractor. The hospital then obtained an ex parte injunction from the state court prohibiting the contractor from taking any steps toward arbitration. After the contractor objected, that stay was dissolved and the contractor filed an action in federal district court seeking an order compelling arbitration under Sec. 4 of the FAA. After the district court stayed the federal proceedings before it, the Fourth Circuit, on appeal by the contractor, reversed and directed the district court to order arbitration. The Supreme Court affirmed.

In so doing, Justice Brennan noted the principles of abstention set forth in Colorado River Water Conservation District v. United States, 424 U.S. 800, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976):

"Abstention from the exercise of federal jurisdiction is the exception, not the rule. 'The doctrine of abstention, under which a District Court may decline to exercise or postpone the exercise of its jurisdiction, is an extraordinary and narrow exception to the duty of a District Court to adjudicate a controversy properly before it. Abdication of the obligation to decide cases can be justified under this doctrine only in the exceptional circumstances where the order to the parties to repair to the State Court would clearly serve an important countervailing interest.' "

Moses H. Cone, 460 U.S. at 14, 103 S.Ct. at 936 (emphasis added) (quoting Colorado, 424 U.S. at 813, 96 S.Ct. at 1244) (quoting County of Allegheny v. Frank Mashuda Co., 360 U.S. 185, 188-89, 79 S.Ct. 1060, 1062-63, 3 L.Ed.2d 1163 (1959)). Colorado River permits federal courts to abstain from exercising their jurisdiction over a case where "considerations of '[w]ise judicial administration, giving regard to conservation of judicial resources and comprehensive disposition of litigation' " so warrant. Colorado River, 424 U.S. at 817, 96 S.Ct. at 1246 (quoting Kerotest Mfg. Co. v. C-O-Two Fire Equip. Co., 342 U.S. 180, 183, 72 S.Ct. 219, 221, 96 L.Ed. 200 (1952)).

The considerations discussed in Colorado River, and/or in Moses H. Cone, include the following: (1) whether the state or federal court has assumed jurisdiction over the res; (2) the inconveniences of the federal forum; (3) the desirability of avoiding piecemeal litigation; and (4) the order in which jurisdiction was obtained by the concurrent forums. Moses H. Cone, 460 U.S. at 16, 103 S.Ct. at 937 (citing Colorado River, 424 U.S. at 818-820, 96 S.Ct. at 1246-1248). In Moses H. Cone the Supreme Court added an additional factor to the balance--(5) whether a federal policy is involved. Id. 460 U.S. at 23, 103 S.Ct. at 941. None of these factors are determinative; rather, they require "a careful balancing of the important factors as they apply in a given case, with the balance heavily weighted in favor of the exercise of jurisdiction." Moses H. Cone, 460 U.S. at 16, 103 S.Ct. at 937.

Applying these considerations to the facts before it, the Court in Moses H. Cone concluded that the exceptional circumstances test of Colorado River was not met, and that therefore abstention was inappropriate. Id. 460 U.S. at 19, 103 S.Ct. at 938 ("[T]he first two factors mentioned in Colorado River are not present here.... The remaining factors--avoidance of piecemeal litigation, and the order in which jurisdiction was obtained by the concurrent forums--far from supporting the stay, actually counsel against it.").

A careful review of the five factors enunciated in Moses H. Cone reveals that the district court should have ordered arbitration in this case. ⁴ As in Moses H. Cone, the first factor, regarding the res, has no bearing on the facts of the instant case. The second factor, inconvenience of the federal forum, while a relevant consideration, does not support abstention here. The Masons argue that they will suffer increased costs if the federal court asserts jurisdiction over this case because the state court is closer to their home. They provide no other evidence of inconvenience; both the federal suit and any arbitration will likely occur in Texas, where the Masons reside. More specifically, at least some increased cost appears to have arisen from the Masons' resistance to arbitration and their litigating in two court systems, in a manner hardly in accord with the Supreme Court's approach that, "...