good morning judge riley judge beam judge sheppard mr hall may please the court the community of being calm in nebraska scuse me a town of not less less than one hundred people in fact spent millions of dollars scarce community resources to construct a water treatment plant in their community that ultimately failed in an effort to hold the two parties responsible for the design and the construction of this water treatment plant baseline engineering and another company called lane christianson company the community filed a civil action in the district of nebraska however in the very beginning stages of the litigation the district court granted baseline engineering's motion to dismiss finding it lacked subject matter jurisdiction under rule twelve b one in doing so your honour's the district court decided to apply one agreement we'll call the baseline  agreement which contain an arbitration clause over another agreement between the parties will call the e j c d c agreement which was approved by the engineer joint contract document commission which did not mandate arbitration in this matter as raised in our brief your honour's the district court's decision is in error for a number of reasons but if i may i'd like to begin with a resolution that does not necessarily require this court to resolve more complicated procedural and standard review review issues that are at stake here instead it requires this court to apply very basic rule of contract construction and that is to apply an ambiguous terms of an agreement as written this court held in the nebraska machinery i'm sorry nebraska public power case i believe judge beam you were the author of that opinion this court held that neither the court nor the parties may pick and choose which unambiguous terms of an agreement to apply baseline does not dispute this proposition and it's a proposition that the district court seemingly attempted to apply here there is an undisputed clause that exists in these agreements even if the district court correctly construed the baseline agreement in the e j c t c agreement together as one even if that was correct which of course we argue it is not but there is a provision in the e j c t c agreement that baseline agreed to and that's paragraph six point zero one k of that agreement which can be found on page two of six of the joint appendix your honors in that provision both parties agreed that all contract documents shall be subject to agency concurrence there is no clause in the baseline agreement that conflicts with six zero one k it is undisputed that the only agreement that was submitted to the u s d a for review and concurrence was the e j c t c agreement it's also undisputed that baseline engineering signed the e j c t c agreement agreeing to its terms and conditions it signed it on august twenty seventh two thousand and nine because that clause is undisputed it is unambiguous this court is required to construe that clause as the parties intended what does that close require your honor that clause on its face in the pla meaning is it requires agency concurrence before the contract can be enforced lose the agency the agency or honor is the u s d a department of rule development they are the federal agency that's in charge of implementing water and waste water loans for rural community projects like this water treatment plant and being common knowledge that dispute resolution provision in there that it does have an arbitration provision but it doesn't you argument it doesn't cover this dispute was that the only one submitted to the government for its concurrence yes your honor that is undisputed a baseline engineering and never submitted the baseline agreement to the u s d a for particular if the agency doesn't concur in the contract it can't be enforced both parties agree that all contracts shall be submitted to the u s d a in that provision well you know it really doesn't it just says the senate scenes with concurrency you're adding some additional language about before it can be enforced or before it's effective it just says shall be subject to agency concurrence are you sure that that's what  would be the effect of that provision i am your honor because if you look at the very definition of the term subject to that means that something has to be done first before it's effective so the very meaning of the term subject to is that it requires that the agency do something before the parties agree that this is the final operative agreement and a bare minimum does the involvement of a federal agency should it have required judge cope to have applied the federal arbitration act well your honor baseline argues that they never intended to follow a motion to compel arbitration under the f a a there is case law that we reference in our brief in particular from the seventh circuit the falcon burke for case for example or the auto mechanics vs vanguard case which indicate here that the federal arbitration act doesn't apply because the the very question as to whether the parties agreed to a contract is at issue so in other words the f a a and the arbitration standards in the presumptions that baseline spends a lot of time on from him as bremen for example don't kick in unless and until the dispute as to whether a valid agreement exists is resolved and in that case the court said that is a question dependent on state contract principles willy arbitration procedure that you have involved yourselves with here is a state arbitration act in is it it's similar to the federal arbitration act in terms of requiring arbitration if there's even a hint of the need for betray and so forth through well your honor the provision you're talking about is one that exists in the baseline agreement that requires the colorado rules of arbitration to apply however our position is that agreement has been supplanted those provisions don't up why in the situation because the operative agreement is the e j c t c agreement and in that if you look at exhibit age of that agreement it lays out that arbitration is only mandated in matters involving less than two hundred thousand dollars baseline doesn't dispute that this matter exceeds two hundred thousand dollars let me ask if if that if the second agreement called was the second one wind of the change orders reference just the first contract i think your honor that there's a couple of issues there first i think there is at a minimum an issue of fact as to what the change orders effect if you look at the face of the change orders that baseline attach to the reply brief in the district court it simply references a standard form of agreement well the e j c t c agreement or the second agreement your honor is also into excuse me entitled standard form of agreement so i think there's again at a minimum a disputed issue as to what what in fact did that change now to the extent there is a reference to the baseline agreement you know baseline says that the u s d a concurred in those change orders again i think that there is an issue of fact as to what did the u s d a believe it was concurring and the only agreement that had been submitted to it was the second agreement or the e j c t c agreement not the baseline agreement i have a concern to the district court decided as under twelve b one and they can't do that the supreme court has always said twelve b three you can't do this and that either who knows what the absolutely correct your honor twelve b one is of course jurisdictional rule and there is plenty of authority that we've cited in our brief in fact the majority rule adopted by the second circuit the fifth circuit the seventh circuit the ninth circuit the eleventh circuit is is that this is not a jurisdictional question before atlantic marine in two thousand and thirteen most of the courts around the country said this was a venue issue arbitration and form selection clauses really  venue issue it landed marien came in and said well twelve b three isn't appropriate it's really more of form non convenience but if we can back up i think it's very clear that twelve b one is not the appropriate rule and the minnesota supply case from the district in minnesota in this case explained why and that's because the parties by way of contract cannot divest the court of its jurisdiction that jurisdiction exists independent of anything the parties do that jurisdiction is constitutional and exists by virtue of statute if if we tilted district judge that he can direct herb a tray shouldn't but he must stay the action rather than dismiss would that cure that will be one problem it wouldn't your honor be well there's a couple of problems with that first off even if the court's applying twelve b one it's a still applying the wrong standard of review here it didn't give deference to the nonmoving party concerning disputed issues of fact and i mention that judge because there's authority and i do want to reserve a little bit of time for rebuttal but i'd like to finish answering your question there is a ty that we've cited to that makes very clear that to the extent there is disputed issues of fact that decision has to be made by the fact finder in fact case law cited by baseline the john morel case for example where the united mine workers case baseline uses those cases for the proposition that this court has to review factual findings for clear air not only is that incorrect because that clear error standard derives out of rule fifty two a which occurs when there is a bench trial or an evidentiary hearing something that did not happen here this issue was decided the very earliest stages on the briefs but that those cases also say in a quote that if we decide that the language is a big  resolution of that ambiguity is a question of fact to be determined by the jury so in response to your question i don't know is if the district court can just stay in order this case to arbitration i think the basic baseline has acknowledged that there are disputed issues of fact here in fact on page thirty nine and forty of their response brief they specifically state that the contract is ambiguous because there are conflicting terms on page forty they say thus the contract is ambiguous in the meaning of the contract is a question of fact well if and that if that isn't the case then this circuits authority make clear that that issue has to be decided by the jury has a jury been demanded in this case yes your honor and if i may reserve the rest of my time for rebuttal yes you may think judge good morning good morning your hono please the court thank you very much for the opportunity to appear in front of you this morning and i appreciate the time i would first like to talk about the agreement of the trial court judge found we believe correctly that the agreement consists of the july two thousand and nine contract and its two attachments which are clearly referenced and there is exhibit a and b is the property description which is a site map which shows where the project is to be located and b is the joint engineering council agreement that's been referred to earlier in the argument today those are the attachments those are the attachments to the document your honor and they are referenced as such and identified as such in the base agreement what about the attachment or the part of the contract that says a jewel arbitrate under two document consists of the engineering contract which has the two hundred thousand arbitration provision in the agreement itself which is the so called july two thousand i'm contracted which was one unified is why do we consider attachments but not exhibits to the contract well your honor the contract itself consists of the agreement and then what they call exhibits a and b that's what they did noted them and integrated them into one document and then exhibit b itself has some sub parts in it as well there are also referred to as attachments or exhibits to that exhibit b and the trial court as the court is aware found that the document the contract consists of those three parts as well as an integration clause and a primacy cause which basically said to the extent there's any inconsistency between the base contract and the two attachments to it that the base contract would govern and take precedence but the other contract says that it's who perceives all others and i'd like you to address that but also in the context that and i'm going to call your client a function the most clients of function on that alone i don't believe so your honor i believe that if you look at the document the document really contemplates the following course of action that there is a planning for the project and i believe the fee is twenty thousand dollars and is set forth on the first page of the agreement and once that planning is done that planning includes doing so didn't pull him an area feasibility studies and financial planning necessary to do a concept that then would submit that concept to u s d a for funding and as a part of that funding process then they said maybe exhibit b pay u s d a requires that for the funding process but u s d a did not get involved july contract could the parties have function and then everything here under the august dock tobar contract and my answer that is no because the initial planning was done under the agreement and then the planning for submission of contract documents drawing specifications and detail materials that's referred to an exhibit b comes later and that's the reason why u s d a didn't get involved until october whereas the engineers started work requirement for submission for funding but it's not a part of the basic agreement that got my client going to do the planning for the city to submit the funding so really it didn't it didn't matter except for the u approval requirement it didn't matter whether the e j d c document was ever signed it did it was you know frequently and construction documents and the court may be aware of this the ai forms frequently have a signed contract on the on the face of it and then they have the so called general conditions the a to a one which is never signed and this e j c d c document is really the technical engineering requirements but the planning started u s d a also your honor signed the change orders u s d a and signing the change orders acknowledge the existence of the original agreement and the composition of the three do i believe that you know what do you base that on because if you look on the face of the change order there's a grid there's a box and right under it it references the july two thousand and nine agreement as the agreement to which the change order is made so we're change ordering to the base contract we're modifying the contract and they did it three times and they always reference the original agreement and the change or what i thought the man thought there was a june twenty the june twenty date  e i think it's july twenty was it july ok i thought it was ok you said july three or something and the july two thousand and nine contract as the trial court judge found consist of the document that bank woman signed on the twentieth and baseline signed on the twenty first according to the dates on the document but the trial court found that when you looked at the documents that you really could not discern when the parties signed each the agreements but they all constitute one and complete agreement and so finding the dates of the individual execution of the attachments was not germane was not dispositive of when the contract started what they were that they would pony up the taxpayers money in any event that the idea well i don't think that that is judge i think that the way this worked if you looked at the contracts is the city engaged in a contract with the engineer to do planning and there was a fixed fee for the planning of about twenty thousand dollars which appears on the face of the contract and that planning is to do feasibility and to assist the city in doing the submissions necessary to see if they can get u s d a funding because the contract provides that there is no guarantee that there would be a funding the u s d a regulations which we've cited in our brief provide that whether or not there's funding does not affect the obligation of the city to baseline or baselines obligation to the city so the notion that the a is a party to this agreement and their approval is necessary for this agreement to be enforceable is contrary to the u s d a regulations the u s d a is interested in evaluating funding well i don't think they're saying they're a party i think they're saying that it's good condition preceding the subject to language nothing was going to go forward until you had a concurrence from the u s and i don't agree with that your honor i think that the planning and this is not unusual engineers and other consultants are hired by parties to plan in the system in determining the feasibility whether they can submit for government funding for various projects and to plan with what they have been able to go forward with his plan without the concurrence of the government if the u s d a had not funded the construction i don't believe the construction would have taken place but i believe that the city of banco men would still have had an agreement with baseline to pay them for the engineering services that were provided at the beginning of the project to do the planning and evaluation so that's all you're after that much is that what you're saying i'm sorry that's all you want to be paid in the final analysis here is for the planning is that right you know your honor the project did move forward and u s d a did fund it be pretty unrealistic to believe the village of becoming the brass could could have done this with out the u s d a s money right well i don't believe that the project would have been feasible without the u s d a money but they the city of bank a man hired the engineer to do the planning and submit an application necessary to qualif to see if they could get the funding and that's an engineering service and that engineering service is contemplated by the contract itself and in the event that the funding was available then the project would move forward and so that's the reason why the contract ha several different components all of which are integrated into want to greenham it was not necessary and there is no provision in the contract that sets forth that there are any subsequent execution of signatures it's not a phase contract there's no additional agreements necessary and once the project started the construction had some additional services and over the next two years that's what gave rise to the change orders that are before the court and when the change orders were executed it's very clear that they were executing the change orders contract but i do know that they were signed by both the city the engineer and acknowledged by the u s d a so all three parties signed them but i had there's nothing in the record that would allow me to answer the question is  was i believe the court is where several circuits have allowed this to proceed under twelve b one at least one other circuit has allowed it to proceed where you have an arbitration clause and of course a point selection clause which is the unique situation here where we have an arbitration clause and we have a form selection clause which would require that the court abstain from jurisdiction because it would be required to send the case to another jurisdiction outside of the court's  fifty six summary judgment or would it the twelve be a twelve d i don't think it would be rule fifty six your honor because it's case law that if you submit a motion for summary judgment in a circumstance in which there is arbitration clause the party could be deemed to have waived the arbitration clause and so in this particular case since we thought we had a valid arbitration clause we filed a motion under rule twelve b and since this circuit had not determine whether to all be one or twelve b three was appropriate we felt comfortable that it was either a daniel issue or a jurisdiction issue because under the supreme court's authority on arbitration clauses the court should favor arbitration clauses and we had an arbitration clause here and we were trying to get it in force so i don't believe the rule fifty six is the right approach to it for that reason just about rule twelve the you know i don't know whether twelve it would apply to will be six where you could fall into twelve the six but then your honor you'd have to file an answer i believe in a certain affirmative defense of the arbitration clause i guess you could file a motion and ask the court to grant your discretion to have it raised under twelve b six without filing in a firm stance but typically affirmative defense would be necessary to raise that as an answer in that context but i think that the two points that i would like to make with the court is is that there is an arbitration cause here and we believe that the trial court judge painstakingly evaluated the facts and the law and concluded that the contract is ambiguous and i believe that if you look at the contract that the parties put together in july of two thousand and nine with exhibits and b to them and a is essential because it tells you where the project is the site plan b is the engineering attack that did that in the district court to make some fact finding some disputed issues it made fact finding on issues necessary for it to resolve the question of the arbitration applicability and to consider a form selection provision and i believe that that is allowed under rule twelve b and that has been allowed in other circuits the circuit has not yet addressed that issue falkenberg case which was cited by my colleague before of course had those kinds of factual considerations determined before there was dismiss it is it relevant which party drafted the standard form agreement and the end exhibit b i don't believe it is under this circumstance your honor if you look at the document it says that neither party will be considered the draft or the document has a provision that neither party shall be considered to draft or for interpretation purposes we believe here that the decision that the contract was ambiguous is a question of law which is subject to do novo review by the court we believe that the fact determination is necessary to evaluate the contract to conclude factually that it was ambiguous is a question of fact and that that that i would answer this way judge it does not represent the services that the parties agree to in their contract so would be right means it's not include the the planning well again include any of the other basic engineering services necessary to start and manage the project from beginning to end the the base contract doesn't just apply to the beginning it's terms applied to the entire course of action for example change orders to the contract are required under the base agreement so two years later when the parties may change orders to add services to the contract between baseline and the owner they referred back to the original agreement and did change orders to that agree and that course of conduct i believe is an indication to the court of what the parties intent was under this contract that they always intended including u s d a that the greenman consisted of all three parts and so i don't believe that you can  one part out without altering the agreement that the parties reached i don't believe it is my problem and that's and bottom line is you rely on the first july document same it to the extent there's any inconsisten that controls yes your honor and with all due respect we see that in contracts every day particularly in construction and design contracts because parties frequently find provisions and attachments and there are multiple attachments and there may be an inconsistency that they didn't find and what they do is they agree that this particular part of the contract will govern to the extent there's any conflict or inconsistency i believe that that's a fairly common drafting technique there was nothing unique about that here the e j c d c agreement complete in itself and the answer is absolutely yes to suggest as my colleague did that the that it's not that it doesn't include some of the services provided is simply not supported by the record if you look at the c agreement on page two of three for example the joint appendix there is an overview of the services that are reflected in that agreement and it includes specifically it says the owner intends to contract a baseline engineering corporation for the services set forth in the agreement in exhibits which follow the project includes the permeating design and construction phase services for a water treatment system to remove arsenic in your rainy him from the ground water engineering services include permeating design construction documents bit administration construction phase services and post construction services baseline will assist with with the requirements from the funding agencies if that's not all encompassing i don't know what is the the baseline agreement from july of two thousand and nine contains nothing like that it does not explain what services are going to be provided in that agreement the e agreement that was submitted to the u s d a by baseline engineering to the u s d a for concurrence includes all of the scope of services the baseline was to provide got out of the base agreement under too b says the services to be performed by the engineer under this agreement are identified in exhibit b well i think doesn't that wrapping and everything that you just described it in the base agreement it doesn't your honor because there is at a minimum an ambiguity as to what exhibit b means let me be clear that there is nothing in the record marked exhibit b baseline says the e j c d c agreement that we have here that was ultimately concurred with by the u s d a is exhibit b but it's not marked as exhibit b it's interesting because if the court looks at student if the court looks at exhibit a that baseline says was marked as exhibit a that's on page fifty two of the joint appendix it's marked exhibit a in big black bold letters there is nothing marked exhibit b on the igi c c agreement so it reminds me it doesn't make a difference to the so called a good exhibit a store october is i make a difference it makes a big difference it reminds me of the circumstances in the us use of lighting case interface construction case referenced in our briefs eight circuit decision that involved similar circumstances where there was a primary contract and then there was a sub contract that was referenced and the court said there was an ambiguity as to what this sub contract was was it this sub contract or was it another contract the parties had contemplated drafting and th same problem lies here that let me back up the court they're also made clear i see i'm out of time meghan ten you go ahead and finish your answer that the court there made clear that a document cannot be incorporated by reference this is in the cooperative refinery case if it's not yet in existence well well two things one is on the cover of the what you call in the base agreement under job description it says see exhibit b here two for accompany c d c agreement and that's number one and then number two for the ija a d c agreement is dated july twentieth which is the date that the city signed the base agreement doing so and in fact there's e mail correspondence from the u s d a to baseline in doing so the u s d a made modifications to the e g c d c agreement between the parties those modifications are reflected in what baseline says is now exhibit b a document that apparently existed at the time the city signed it in july of two thousand and nine that's physically impossible there is no way that those modifications existed when the city signed the baseline agreement on july twent two thousand and nine so it's a standard form but there were changes made afterwards yes yes your honor if if if the court looks at the joint appendix page two forty eight it's correspondence from the u s d a to baseline in which it says it appears the parties use the appropriate agreement and the agency concurs subject to the following modifications and there were a couple of modifications made for example to the limitations of liability and there was another modification made they were hand written any initial if you look at the exhibit b that the document that they signed calls exhibit b it contains those handwritten modifications those were made until october of two thousand and nine so that document didn't exist it couldn't have existed in july of two thousand and nine and again the cooperate or refinery case kicks in which says you can't incorporate a document by reference unless it exists and it goes to if i made to the basic contract principle of assent there must be a meeting of the minds in order to have an enforceable agreement both parties have to understand what the material terms are and at that time they understood ok ok with that judge if there aren't any other questions i think the court for its time ok thank you both thank you well argued