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NATIONAL HYDRO SYS. v. SUMMIT CONSTRUCTORS

December 14, 1989

NATIONAL HYDRO SYSTEMS, A Division Of McNISH CORPORATION, Plaintiff
v.
SUMMIT CONSTRUCTORS, INC., and THE INDUSTRIAL COMPANY OF STEAMBOAT SPRINGS, INC., Defendants


Brian Barnett Duff, United States District Judge.


The opinion of the court was delivered by: DUFF

BRIAN BARNETT DUFF, UNITED STATES DISTRICT JUDGE

 Summit Contractors, Inc. and The Industrial Company of Steamboat Springs, Inc. ("TIC") have moved to dismiss the complaint of National Hydro Systems under Rules 12(b)(2)-(3), Fed.R.Civ.Pro. In the alternative, Summit and TIC ask this court to transfer this case to the court for the District of Colorado. While this court must deny the motion to dismiss, the court believes that the case indeed warrants transfer pursuant to 28 U.S.C. ┬ž 1404(a) (1982).

 In ruling on a motion to dismiss under Rules 12(b)(2)-(3), the court must resolve the factual conflicts in the parties' submissions in favor of the plaintiff, and draw any reasonable inferences from those facts in the plaintiff's favor. See Deluxe Ice Cream Co. v. R.C.H. Tool Corp., 726 F.2d 1209, 1215 (7th Cir. 1984); J. Walker & Sons v. DeMert & Dougherty, Inc., 821 F.2d 399, 402 (7th Cir. 1987).

 National Hydro is a division of McNish Corporation, an Ohio corporation which has its principal place of business in Illinois. Summit and TIC are Colorado and Delaware corporations, respectively; each has its principal place of business in Colorado. The latter companies had a joint venture, Summit/TIC. In the summer of 1988, Summit/TIC was gathering information in order to submit a bid to construct a nitrification facility for a Denver sewage disposal district. Summit/TIC received a written quotation from MISCO Rocky Mountain, National Hydro's authorized representative in Denver. National Hydro hoped to supply a circular sludge collector for the project. Had National Hydro received Summit/TIC's approval, it would have manufactured and shipped the collector largely from Illinois.

 In late August 1988, MISCO and National Hydro held a meeting with Summit in Denver. Summit/TIC then submitted its bid to the sewage district, and sent National Hydro a letter of intent. The letter stated that Summit/TIC intended to buy National Hydro's collector were Summit/ TIC the low bidder on the sewage project. On October 6, 1988, after learning it was the low bidder, Summit/TIC sent National Hydro a purchase agreement, again through MISCO. This proposed agreement incorporated the terms of National Hydro's bid, but included other terms as well. It did not include a provision governing choice of law and arbitration of disputes.

 National Hydro received Summit/TIC's written proposal on October 17, 1988. The companies then had many discussions relating to the sale of the collector, mostly over the phone between Denver and Chicago, but a few in face-to-face meetings in Denver as well. During these discussions National Hydro allegedly advised Summit/TIC that it was beginning work on the collector, so that it could meet Summit/TIC's timetable. Soon National Hydro submitted a writing to Summit/TIC which allegedly accepted the essential terms of Summit/TIC's purchase agreement, modified others, and added a few terms of its own. National Hydro included a copy of its standard "Terms and Conditions of Sale," whose terms read in part:

 
15. CHOICE OF LAW - The agreement between NATIONAL HYDRO SYSTEMS and Purchaser and all matters connected with the performance thereof shall be construed in accordance with, and governed by, the law of the State of Illinois. . . .
 
19. ARBITRATION - Any controversy or claim arising out of or relating to this agreement, or the breach thereof, including Purchaser's failure to make any required payments to NATIONAL HYDRO SYSTEMS, shall be settled in Aurora, Illinois by arbitration in accordance with the Rules of the American Arbitration Association, and judgment upon the award rendered by the Arbitrator may be entered in any Court having jurisdiction thereof. . . .

 After submission of this offer, the parties met on November 16, 1988, again in Denver. According to National Hydro, the parties agreed on the remaining terms at this meeting. Summit/TIC followed up on this meeting by sending a letter to National Hydro the next day; this letter stated that the terms of National Hydro's standard agreement were acceptable to the extent that they did not conflict with the terms of the Summit/TIC purchase agreement.

 Summit and TIC first argue that this court lacks jurisdiction over them. A federal court has jurisdiction over a defendant when the plaintiff has served the defendant properly according to a statute or rule, and has accomplished such service in accord with due process. See Omni Capital Int'l v. Rudolf Wolff & Co., 484 U.S. 97, 104, 108 S. Ct. 404, 98 L. Ed. 2d 415 (1987); Rose v. Franchetti, 713 F. Supp. 1203, 1205 (N.D.Ill. 1989). Like the defendant in Rose, Summit and TIC do not question the form of the service they received; they question only by what authority National Hydro served them.

 National Hydro responds that Summit and TIC themselves authorized service, by consenting to arbitrate before a forum within this federal district. Many courts have recognized that an agreement to arbitrate is meaningless unless some court has the power to compel arbitration in the chosen forum. Typically, that court is the one where the forum is. See Merrill Lynch, Pierce, Fenner & Smith v. Lecopulos, 553 F.2d 842, 844-45 (2d Cir. 1977); Mutual Fire, Marine and Inland Ins. Co. v. Barry, 646 F. Supp. 831, 833-34 (E.D.Pa. 1986). Here, National Hydro has invoked this court's diversity jurisdiction; for purposes of this case, this court is a state court, one embracing the site of a chosen forum.

 Summit and TIC respond that they did not agree to arbitrate this dispute in Illinois, and so the arbitration clause does not waive their right to contest the jurisdiction of this court over them. Summit and TIC ignore the posture of this case, and the court's duty on the present motion. The facts as alleged are that the parties had a contract, and that one of the promises contained in this contract was one to arbitrate. Summit and TIC may contest this, and they are free to insist in later motions that this court lacks jurisdiction over their persons, but their right to ...


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