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Aptim Corp. v. McCall

United States District Court, E.D. Louisiana

September 19, 2017


         SECTION “H”



         Before the Court is Plaintiff's Motion to Compel Arbitration and Stay State Court Proceeding (Doc. 7). For the following reasons, the Motion is GRANTED.


         Despite its recent filing, this matter has brought with it a sordid and complicated procedural background. On June 15, 2017, Shaw Group, Inc. (“Shaw”) filed an action against Dorsey Ron McCall in the 19th Judicial District Court of Louisiana alleging breach of a non-compete and non-solicitation employment agreement (the “Employment Agreement”) and requesting an injunction and damages (the “State Court Action”). The parties proceeded to a hearing on Shaw's motion for a temporary restraining order to prevent McCall from working for his new employer, Allied Power Management, LLC (“Allied”). The parties ultimately entered into a joint protective order. Allied joined the State Court Action as an intervenor.

         On June 30, 2017, Aptim Corp (“Aptim”) acquired the capital services business segment of Shaw. As part of the sale, Aptim was assigned rights relating to McCall's Employment Agreement. On July 6, 2017, Shaw filed a motion to substitute Aptim as plaintiff in the State Court Action. McCall and Allied opposed this motion and sought discovery of the assignment of rights between Aptim and Shaw.

         On July 17, 2017, prior to the issuance of an order regarding the motion to substitute, Shaw withdrew the motion. On the same day, Shaw amended its petition to remove its request for damages and then moved to voluntarily dismiss its claims with prejudice. Also on that same day, Aptim filed a demand for arbitration with the AAA pursuant to the arbitration clause in McCall's Employment Agreement. Perceiving Shaw's actions to be indicative of forum shopping and in violation of the protective order, McCall and Allied opposed its motion for voluntary dismissal. The state court thereafter denied Shaw's motion for voluntary dismissal.

         Upon receiving the notice of arbitration, McCall and Allied filed a Motion to Stay Arbitration in the State Court Action. After a hearing on the motion, the state court issued an order on September 1, 2017, stating that:

         IT IS HEREBY ORDERED that:

1. Aptim is recognized and joined with Shaw as a party-litigant, effective June 30, 2017, in accordance with La.C.C.P. art. 807.

         IT IS FURTHER ORDERED that:

2. The filing and prosecution of the above captioned action constituted a waiver of the arbitration provision of the Employment Agreement and Noncompete Agreement entered into between McCall and The Shaw Group, Inc. (“Shaw”), effective January 1, 2012.

         IT IS FURTHER ORDERED that:

3. Shaw and Aptim have engaged in a pattern of forum shopping. IT IS FURTHER ORDERED that:
4. Aptim's filing of the arbitration proceeding against McCall with the American Arbitration Association on July 17, 2017 (Case No. 01-17-0004-1782) (the “Arbitration”) was in violation of the Joint Protective Order entered by this Court on June 20, 2017.

         IT IS FURTHER ORDERED that:

5. Allied and McCall's Joint Motion to Stay Arbitration is therefore granted and the Arbitration is stayed.

         Accordingly, the State Court Action remains pending, and the parties are engaged in ongoing discovery.

         On August 21, 2017, Aptim filed the instant action before this Court against McCall, asking for expedited consideration and seeking an order compelling arbitration and staying the state court proceeding pursuant to the Federal Arbitration Act (“FAA”). Pursuant to the FAA, a petition to compel arbitration “shall be made and heard in the manner provided by law for the making and hearing of motions, ” and this Court ordered expedited response thereto.[8] McCall filed an opposition, arguing that (1) this Court lacks jurisdiction, (2) that it should abstain from exercising its jurisdiction under the Colorado River abstention doctrine, and (3) that Plaintiff has waived its right to arbitration. The Court held oral argument on these issues on September 8, 2017 and took Plaintiff's Motion under advisement.

         In an attempt to give the parties some speedy relief, the Court held on September 12, 2017 that it had jurisdiction over this dispute and would exercise that jurisdiction. It ordered Defendant to file responsive pleadings. On September 18, 2017, Defendant filed a Motion to Dismiss setting forth substantially the same arguments at issue here.


         The question of arbitrability is governed by the Federal Arbitration Act (“FAA”), 9 U.S.C. § 1 et seq., which broadly applies to any written provision in “a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction.”[1] A two-step analysis governs whether parties should be compelled to arbitrate a dispute.[2] The Court must first determine whether the parties agreed to arbitrate the dispute.[3] This determination involves two separate inquiries: (1) whether there is a valid agreement to arbitrate between the parties, and, if so, (2) whether the dispute in question falls within the scope of that agreement.[4] Both inquires are generally guided by ordinary principles of state contract law.[5] The strong federal policy favoring arbitration applies “when addressing ambiguities regarding whether a question falls within an arbitration agreement's scope, ” but it does not apply “when determining whether a valid agreement exists.”[6] If the Court finds the parties agreed to arbitrate, it must then proceed to the second step of the analysis and consider whether any federal statute or policy renders the claims non-arbitratable.[7]


         Before this Court can consider Plaintiff's request to compel arbitration, it must consider the two threshold issues raised by Defendant. Defendant argues that (1) this Court lacks jurisdiction over this dispute, and (2) that the Court should abstain under the Colorado River doctrine from hearing this matter. This Court will consider each argument in turn.

         A. Jurisdiction

         Defendant first argues that this Court lacks subject matter jurisdiction. Plaintiff alleges jurisdiction based on diversity of citizenship pursuant to 28 U.S.C. § 1332. Defendant argues that the Complaint fails to properly plead the citizenship of Defendant when it states merely that he “resides in Lake Charles, Louisiana.” Defendant correctly points out that an allegation of residency is insufficient to establish citizenship.[9]

         Plaintiff's failure to properly allege citizenship is not fatal, however.[10]Under 28 U.S.C. § 1653, “[d]efective allegations of jurisdiction may be amended, upon terms, in the trial or appellate courts.” Where “jurisdictional problems are of the ‘technical' or ‘formal' variety, they fall squarely within the ambit of § 1653.”[11] Thus, amendment should be allowed where “‘diversity jurisdiction was not questioned by the parties and there is no suggestion in the record that it does not in fact exist.'”[12]

         Defendant does not argue that he is not a citizen of Louisiana, and there is nothing in the record to suggest such. Rather, the defect identified by Defendant is easily remedied through an amendment to the Complaint. Because Plaintiff is a citizen of Delaware and Texas, Defendant is a citizen of Louisiana, and the amount in controversy exceeds $75, 000, this Court has diversity subject matter jurisdiction over this matter. Plaintiff shall be granted leave to amend its Complaint to properly allege such.

         B. Abstention

         Defendant next argues that this Court should abstain from deciding the issues before it pursuant to the Colorado River abstention doctrine. The Colorado River abstention doctrine allows a court to abstain from exercising its jurisdiction under exceptional circumstances. Colorado River applies “when suits are parallel, having the same parties and the same issues.”[13] “Under Colorado River, a district court may abstain from a case only under ‘exceptional circumstances.'”[14] The Supreme Court has identified six factors to consider in deciding whether “exceptional circumstances” exist:

1) assumption by either court of jurisdiction over a res, 2) relative inconvenience of the forums, 3) avoidance of piecemeal litigation, 4) the order in which jurisdiction was obtained by the concurrent forums, 5) to what extent federal law provides the rules of decision on the merits, and 6) the adequacy of the state proceedings in protecting the rights of the party invoking federal jurisdiction.[15]

         The factors are to be weighed “with the balance heavily weighted in favor of the ...

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