Wills v. Arizon Structures Worldwide, LLC, Civil Action No. 2:15–CV–193.

Decision Date20 August 2015
Docket NumberCivil Action No. 2:15–CV–193.
Citation124 F.Supp.3d 760
Parties David WILLS, et al, Plaintiffs, v. ARIZON STRUCTURES WORLDWIDE, LLC, et al, Defendants.
CourtU.S. District Court — Southern District of Texas

Kristina M. Jones, John Da Grosa Smith, Smith LLC, Atlanta, GA, Michael Mowla, Michael Mowla, PLLC, Cedar Hill, TX, for Plaintiffs.

C. David Goerisch, Lewis Rice LLC, Saint Louis, MO, Tom M. Harrison, The Hornblower Firm, Corpus Christi, TX, for Defendants.

ORDER

NELVA GONZALES RAMOS, District Judge.

Before the Court is Respondents' Motion to Dismiss (D.E. 11) filed by Arizon Structures Worldwide, LLC (Arizon) and Johnson Marcraft, Inc. (JMI), along with briefing in opposition (D.E. 15), reply (D.E. 27), sur-reply (D.E. 36), and response to sur-reply (D.E. 37). For the reasons set out below, the Court GRANTS the Motion to Dismiss.

JURISDICTION

Petitioners, David Wills (Wills) and James Salmon (Salmon), are natural persons who are citizens of Texas and Florida, respectively, whereas Respondent Arizon is a citizen of Illinois and Missouri and Respondent JMI is a citizen of Missouri. Respondents Ron Scharf and Jan Ligas, who have since been dismissed from this case, are natural persons who are citizens of Missouri and New Jersey, respectively. The amount in controversy exceeds $75,000. Wills and Salmon properly predicate jurisdiction in this Court on diversity of citizenship, 28 U.S.C. § 1332, and the Federal Arbitration Act, 9 U.S.C. § 4.

STANDARD OF REVIEW

The test of pleadings under Federal Rule of Civil Procedure 12(b)(6) is devised to balance a party's right to redress against the interests of all parties and the court in minimizing expenditure of time, money, and resources devoted to meritless claims. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 558, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). A motion to dismiss based upon principles of res judicata or collateral estoppel, while ordinarily adjudicated in a summary judgment motion based upon the affirmative defense, is proper under Rule 12(b)(6) where the basis for dismissal is clear on the record. Test Masters Educ. Servs., Inc. v. Singh, 428 F.3d 559, 570–76 (5th Cir.2005).

Whether res judicata applies is a question of law. Id. at 571. Arizon and JMI assert that their claim of res judicata may be demonstrated on the face of the record, consistent with Rule 12(b)(6) because relevant documents are attached to the Petition (D.E. 1). Kennedy v. Chase Manhattan Bank USA, NA, 369 F.3d 833, 839 (5th Cir.2004) (court may consider documents attached to the complaint in a Rule 12(b)(6) challenge). At issue are the contracts between the parties and the orders of the Missouri state courts: D.E. 1–1, 1–2, 1–5, 1–6, 1–7, 1–8.

The Court may also consider documents filed in the public record of the parallel state court action, all of which are put in issue by the Petition (D.E. 1) and were provided in the Motion to Dismiss (D.E. 11). Cinel v. Connick, 15 F.3d 1338, 1343 n. 6 (5th Cir.1994). In a separate notice, Wills and Salmon filed a copy of the order denying their motion to compel arbitration for the Court's consideration—another public record pertaining to the res judicata issue. D.E. 26–1. Also at issue is Petitioners Wills and Salmon's relationship with Global Blue Technologies–Cameron, LLC and its affiliates1 (jointly GBT). In their Petition, Petitioners state that they are agents of GBT. D.E. 1, pp. 5, 10, 12. In answers to the Missouri state court action, copies of which Petitioners submitted for the Court's consideration, Wills states that he is the Chief Executive Officerof GBT. D.E. 35. And Salmon is President of an affiliate. Id.

Wills and Salmon do not resist treatment of the res judicata issue as one for dismissal under Rule 12(b)(6). Thus the Court proceeds under Rule 12 and does not convert this matter to a summary judgment motion under Rule 56.

FACTS

On April 16, 2013, GBT, along with Arizon and its affiliate, JMI (jointly referred to as Arizon), executed a Non–Disclosure Agreement, Financing and Supply Agreement (NDAFS) whereby GBT and Arizon could freely exchange trade secret and other confidential information in connection with the purchase and sale of large outdoor dome structures. GBT, which is in the business of shrimp farming in Taft, Texas, sought these structures from Arizon in connection with its operations. Wills, Chief Executive Officer for GBT, signed the NDAFS in his representative capacity. The Arizon representative signed the NDAFS as Chairman of both Arizon and JMI.

In separate but immediately sequential clauses, the NDAFS contains both an arbitration clause ruling out litigation and a forum-selection clause in the event of litigation:

"Any dispute relating to this Agreement or any other matter shall be fully and finally resolved by binding Arbitration under the rules of the American Arbitration Association ‘AAA’ at a location that is mutually agreed by the Parties hereto, or if no such agreement is reached, then at a location specified by an Arbitrator shall be final and binding upon the Parties, from which there shall be no appeal." D.E. 1–1, p. 3.
"Should either Party bring any action arising from this Agreement, such action must be initiated and maintained in a federal or state court located in or covering Saint Louis County, Missouri ("Competent Court")." Id.

A few weeks later, on April 29, 2013, Arizon issued three Quotations for the sale of separate structures, listing as "Buyer" the following: David K. Wills, Jim Salmon, and GBT. D.E. 1–2. The Quotations begin with the statement: "Buyer expressly acknowledges the Non–Disclosure Agreement, Financing and Supply Agreement ("NDAFS") dated April 16th, 2013.... The Goods being purchased by the Buyer from the Seller are a part of the Exclusive products and processes provided for in said NDAFS." Id., p. 2. The terms of the Quotation include a combination forum-selection and arbitration clause:

"Any controversy or claim arising out of or relating to payment, or to Seller's Submittal, Buyer and Seller's Contract, including these Terms and Conditions of Sale, or any other matter, shall be settled exclusively in St. Louis County Missouri Circuit Court, or at Seller's option, by arbitration administered by the American Arbitration Association (AAA) under its Construction Industry Arbitration Rules in St. Louis County, Missouri, and Buyer hereby waives any appeal from the arbitration award and Fast Track Procedures provided for by AAA Rules and Procedures." D.E. 1–2, p. 4.

This agreement was signed on the Buyer's Acceptance page by Wills and Salmon, without stating their representative capacities for GBT, on lines preceding the indication "Duly Authorized Representatives." Id., p. 3.

A dispute between the parties ensued and GBT did not make a June 1, 2014 payment to Arizon or other payments thereafter. On December 11, 2014, Arizon filed suit against GBT, Wills, and Salmon in the Circuit Court of the County of St. Louis, State of Missouri under Case No. 14SL–CC04233. Before being served with that lawsuit, GBT (without inclusion of Wills and Salmon) initiated an arbitration proceeding in Houston, Texas, against Arizon. In the Missouri Circuit Court, Arizon filed a motion to stay the arbitration, claiming that there was no enforceable arbitration agreement between the parties; GBT filed a motion to compel arbitration. Neither Wills nor Salmon defended against Arizon's motion to stay and neither joined in GBT's motion to compel.

On February 10, 2015, the Missouri Circuit Court denied GBT's request to compel arbitration and granted Arizon a stay of arbitration. D.E. 1–5. The Missouri Circuit Court's subsequent order of March 27, 2015, refusing to stay the litigation pending appeal of the arbitration order, finds that Wills and Salmon did not oppose the motion to stay arbitration. D.E. 1–6, p. 2. After the Circuit Court converted its no-arbitration "order" to a "judgment," the Missouri Court of Appeals, Eastern District, in No. ED102757, accepted GBT's appeal of the no-arbitration order and, on April 22, 2015, issued a stay of litigation as to claims against GBT, but not as to the individuals.2 D.E. 18. GBT's appeal remains pending.

On April 29, 2015, Wills and Salmon filed their motion to dismiss the Missouri Circuit Court action, contesting personal and subject matter jurisdiction, individual liability, and seeking to compel arbitration. D.E. 11–8. On the same date, they filed this action to stay the Missouri state court action and compel arbitration. D.E. 1. On June 2, 2015, Arizon filed its Motion to Dismiss this federal action. Thereafter, on June 7, 2015 (in advance of a June 10, 2015 hearing in the Missouri Circuit Court), Wills and Salmon sought a temporary restraining order and preliminary injunction from this Court to prevent further litigation in the Missouri Circuit Court action pending an order compelling arbitration. D.E. 14.

On July 1, 2015, the Missouri Circuit Court entered its order denying Wills and Salmon's motion to dismiss that action. D.E. 26–1. In that order, the Missouri Circuit Court observed that it had already ruled against arbitration of the claims in the case and further stated that Wills and Salmon had an even lesser claim to arbitration than GBT because they were not parties to the NDAFS. Id. There is nothing in the record indicating whether Wills and Salmon appealed that decision. However, they have complied with the Missouri Circuit Court's order that they file their answers to the claims against them, thus continuing the Missouri Circuit Court litigation on the merits. D.E. 35.

DISCUSSION OF RES JUDICATA

In its Motion to Dismiss now pending before this Court, Arizon argues that Wills and Salmon are bound by the Missouri Circuit Court's April 8, 2015 no-arbitration judgment under principles of res judicata or collateral estoppel because Wills and Salmon are in privity with GBT. Arizon disclaims any reliance on the July 1, 2015 Missouri Circuit Court order denying...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT