United States District Court, E.D. Louisiana
ORDER AND REASONS
TRICHE MILAZZO UNITED STATES DISTRICT JUDGE.
the Court is Plaintiff's Motion to Compel Arbitration and
Stay State Court Proceeding (Doc. 7). For the following
reasons, the Motion is GRANTED.
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.
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.
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.
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:
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.
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.
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.
FURTHER ORDERED that:
5. Allied and McCall's Joint Motion to Stay Arbitration
is therefore granted and the Arbitration is stayed.
the State Court Action remains pending, and the parties are
engaged in ongoing discovery.
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. 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.
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.
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.” A two-step analysis
governs whether parties should be compelled to arbitrate a
dispute. The Court must first determine
whether the parties agreed to arbitrate the dispute. 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. Both inquires are generally guided
by ordinary principles of state contract law. 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.” 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.
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
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.
failure to properly allege citizenship is not fatal,
however.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.” 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
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.
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.” “Under
Colorado River, a district court may abstain from a
case only under ‘exceptional
circumstances.'” 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.
factors are to be weighed “with the balance heavily
weighted in favor of the ...