United States District Court, N.D. Illinois, Eastern Division
CHARLES P. KOCORAS, District Judge.
Now before the Court is the motion of Defendant Sany America, Inc. ("Sany") to dismiss this action for improper venue pursuant to Fed.R.Civ.P. 12(b)(3), based on an arbitration provision in a "Distributor Agreement" between Sany and Plaintiff Imperial Crane Sales, Inc. ("Imperial"). Sany's Motion asserts that "Imperial and SANY agreed to submit any disputes arising from their commercial relationship to arbitration in Atlanta, Georgia." See Def. Mot., Dkt. 8, at 1. Three days after the briefing on this motion was concluded, Imperial filed an arbitration demand with the American Arbitration Association ("AAA") in Atlanta, in which Imperial admits that its demand there "includes the claims" it brings here. See Def. Supp. Ex. A, Dkt. 26-1, at 1. Sany contends in the instant motion to dismiss this case that "it is for the arbitrator, and not this Court, to determine whether Imperial's claims are covered by or within the scope of the arbitration agreement." Def. Mem., Dkt. 9, at 7-8.
For the following reasons, the Court agrees with Sany that the arbitrability of Imperial's claims should be determined in the AAA proceeding now pending in Atlanta. The Court disagrees, however, that the instant action should be dismissed before that determination is made, and thus grants Imperial's request, pursuant to 9 U.S.C. § 3 of the Federal Arbitration Act (the "FAA"), to stay this action pending a determination of arbitrability in the Atlanta proceeding. See Pltf. Resp., Dkt. 18, at 12-13. Accordingly, Sany's motion to dismiss (Dkt. 8) is denied without prejudice pending the determination of arbitrability in the Atlanta proceeding, during which time this action will be stayed.
Imperial "is a distributor, supplier and lessor of cranes, and related equipment and machinery, " Compl., Dkt. 1-1, ¶ 1; and Sany "is in the business of selling cranes and heavy equipment." Id. at ¶ 2. Imperial's claims in this case concern three purchases of cranes from Sany. Pltf. Resp., Dkt. 18, at 1. Imperial's first purchase- for a Sany "crawler crane"-is evidenced by a March 17, 2011 letter from Imperial to Sany reciting "the purchase of one new Sany model... crawler crane for the sum of $2, 100, 000.00 USD, subject to" various conditions, including those "outlined in the attached Floor Plan Financing' agreement." Chen Decl. Ex. A, Dkt. 10, at 6-7.
Among other things, this financing agreement stated that a "Dealer Agreement must be signed and in place before delivery." Id. at 7. Notwithstanding this stated condition, however, Imperial and Sany did not sign their Distributor Agreement until July 5, 2011, three months after the crawler crane was delivered to Imperial on or about March 30, 2011. See Pltf. Resp., Dkt. 18, at 3, 5; Chen Decl. Ex. B (Distributor Agreement), Dkt. 10, at 24. But the Distributor Agreement they ultimately signed included the following integration clause addressing such earlier agreements: "This Agreement, together with any and all exhibits hereto and Purchase Orders, constitutes the entire agreement of the parties hereto with respect to the subject matter herein and therein, and supersedes all prior oral or written agreements. Any and all exhibits hereto and Purchase Orders completed pursuant to Section 1.4(a) hereof are hereby incorporated by reference into this Agreement." Dkt. 10, at 22, § 5.2(a) (emphasis added). In addition, this Distributor Agreement also included an arbitration provision requiring that "any and all controversies or claims arising out of or relating to this Agreement shall be settled by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association." Id. at § 5.8.
In the months following the parties' execution of this Distributor Agreement, Imperial made its second and third purchases from Sany-for various "rough terrain cranes"-in November and December 2011, with delivery "commencing in early February 2012." Compl., Dkt. 1-1, ¶¶ 45-46, 52-55, 58-60, 63, and Exs. 2-4, Dkt. 1-1, at 23-28. But according to Imperial's Complaint, at least some of the cranes delivered "suffered from significant manufacturing deficiencies" and "were not in the condition as warranted." Compl., Dkt. 1-1, ¶ 65. When "repairs and servicing" of these cranes "proved unsuccessful, " Imperial notified Sany "of its revocation of acceptance of these cranes, " id. at ¶ 74; Sany "acknowledged the issues" with the cranes and "accepted Imperial Crane's revocation of acceptance, " id. at ¶ 76; and Imperial canceled its remaining order for additional cranes. Id. at ¶ 78. As a result, Imperial was allegedly "forced to find and purchase" other rough terrain cranes at a higher price, "rent substitute cranes" while awaiting delivery of these replacements, and "lost revenue" while substitutes were unavailable. Id. at ¶¶ 79-84.
Similar issues allegedly plagued the crawler crane that was the subject of Imperial's first crane purchase from Sany. According to Imperial's Complaint, shortly after this purchase, Sany notified purchasers of this crane (including Imperial) of certain limitations preventing the crane's use in specified applications. Id. at ¶ 32. In addition, other deficiencies with the crawler crane "became apparent over time, " id. at ¶ 34; and "repairs ultimately provided by Sany America did not resolve the deficiencies." Id. at ¶ 38. As a result, Imperial was allegedly again "forced to rent other cranes to substitute, " "lost rental revenue, " and "incurred substantial labor expense servicing and repairing deficiencies with the Crawler Crane." Id. at ¶¶ 40-44. Following these issues, and the foregoing issues with the rough terrain cranes, Sany allegedly terminated the parties' Distributor Agreement in 2013, see Pltf. Resp., Dkt. 18, at 12; Def. Reply, Dkt. 20, at 6-7. This litigation then ensued in 2014.
Imperial originally filed its Complaint against Sany in the Circuit Court of Cook County, Illinois, Law Division, on December 22, 2014. See Removal Not., Dkt. 1, at 1. Sany removed that action to this district on January 28, 2015, asserting diversity jurisdiction under 28 U.S.C. 1332, id., and then filed the instant motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(3) on February 4, 2015. Dkt. 8. Briefing on this motion proceeded according to this Court's Order of February 10, 2015, Dkt. 15, concluding with Sany's Reply filed March 24, 2015. Three days later, Imperial filed its arbitration demand in Atlanta, in which Imperial admitted that its demand there "includes the claims set forth" here. See Dkt. 26-1, at 1. Additional briefing then followed in this action in April 2015, addressing the impact of Imperial's AAA proceeding on the instant motion to dismiss. See Dkts. 23-27. Having reviewed all of the parties' briefs on this motion, including that supplemental briefing, the Court now denies Sany's motion to dismiss without prejudice, but stays the instant action while the arbitrability of Imperial's claims is determined in the Atlanta AAA proceeding.
The Seventh Circuit has made clear that a motion to dismiss based on an arbitration clause is properly asserted as one challenging venue under Fed.R.Civ.P. 12(b)(3), Faulkenberg, 637 F.3d at 808, since an arbitration provision "is a type of forum selection clause." Jackson v. Payday Fin., LLC, 764 F.3d 765, 772 (7th Cir. 2014). And as noted above, a motion under Rule 12(b)(3) requires the Court to assume the truth of the plaintiff's factual allegations and draw reasonable inferences in its favor, id. at 806, but does not limit a district court to the allegations in the plaintiff's complaint. In determining whether venue is proper in this district, this Court thus may consider not only Imperial's Complaint and exhibits, but also the materials submitted with the parties' briefs on this motion, including their Distributor Agreement and its arbitration clause. See id. at 809-10 (it is appropriate to consider evidence submitted with motion, including agreement containing arbitration clause).
Neither party disputes these standards. As for the substantive law applicable to Sany's motion, however, the parties disagree. Sany argues that the FAA ultimately "applies to this case because the Distributor Agreement involves interstate commerce, " Def. Mem., Dkt. 9, at 5 (citing 9 U.S.C. § 2), but that Georgia law governs any questions concerning contract formation, pursuant to a choice of law provision in the parties' Distributor Agreement. Def. Mem., Dkt. 9, at 5-7. Imperial, on the other hand, while acknowledging that "federal courts apply state-law principles of contract formation, " argues that the three purchase orders at issue "do not include selection of law clauses, " and thus asserts that "Illinois law applies." Pltf. Resp., Dkt. 18, at 3. The Court agrees with Sany that the FAA governs the arbitrability issue raised by Sany's motion to dismiss.
The parties are correct that the "validity and meaning of a forum selection clause"-which includes an arbitration provision-is generally determined in a diversity case "by reference to the law of the jurisdiction whose law governs the rest of the contract in which the clause appears." Jackson, 764 F.3d at 774-75 (quoting Abbott Labs. v. Takeda Pharm. Co., 476 F.3d 421, 423 (7th Cir. 2007)). "Once it is clear, however, that the parties have a contract that provides for arbitration of some issues between them, any doubt concerning the scope of the arbitration clause is resolved in favor of arbitration as a matter of federal law." Gore v. Alltel Commc'ns, LLC, 666 F.3d 1027, 1032 (7th Cir. 2012). The parties here dispute neither the validity nor enforceability of their ...