Source: http://openjurist.org/176/f3d/369/security-watch-inc-v-sentinel-systems-inc
Timestamp: 2015-02-01 04:21:28
Document Index: 6457903

Matched Legal Cases: ['§ 16', '§ 16', '§ 16', '§ 16', '§ 16', '§ 16', '§ 16', '§ 1291']

176 F3d 369 Security Watch Inc v. Sentinel Systems Inc | OpenJurist
176 F. 3d 369 - Security Watch Inc v. Sentinel Systems Inc	Home176 f3d 369 security watch inc v. sentinel systems inc
176 F3d 369 Security Watch Inc v. Sentinel Systems Inc 176 F.3d 369
SECURITY WATCH, INC., Plaintiff-Appellant,v.SENTINEL SYSTEMS, INC.; American Telephone and TelegraphCompany, Defendants-Appellees.
No. 97-6496.
Argued March 10, 1999.Decided May 11, 1999.
Rebecca Adelman (argued and briefed), John Cacciatore, Glassman, Jeter, Edwards & Wade, Memphis, TN, for Plaintiff-Appellant.
Rebecca P. Tuttle (argued and briefed), Steven C. Brammer (briefed), Farris, Mathews, Branan & Hellen, Memphis, TN, for Defendants-Appellees.
Plaintiff-Appellant Security Watch, Inc. ("Security"), a dealer in security systems, brought this action in the Western District of Tennessee against Defendant-Appellee Sentinel Systems, Inc. ("Sentinel"), its distributor, and Defendant-Appellee American Telephone and Telegraph Company ("AT & T"), the manufacturer of the systems. Holding that the Tennessee forum was precluded under the pertinent dealer contracts, the district court dismissed the action. We AFFIRM IN PART and REVERSE IN PART. We conclude that the district court correctly held that a forum-selection provision of the agreements precluded the prosecution of the action in Tennessee against Sentinel, which was a party to the contracts with Security. We hold that the district court erred, however, in concluding that a dispute-resolution provision first included in the parties' 1994 contract was applicable to disputes arising under earlier contracts and precluded the prosecution in Tennessee of all claims against both defendants. Thus, Security will be permitted to proceed against AT & T in the Western District of Tennessee on its pre-1994 claims.
This commercial dispute involves several parties and several contracts. From at least 1988 through 1994 Security served as a dealer of security systems distributed by Sentinel and manufactured by AT & T. Annual agreements between Security and Sentinel governed the business relationship. AT & T was not a party to these agreements. The 1993 Agreement (and earlier contracts) included a forum-selection provision that confined litigation "involving, arising under, or interpreting" the agreements to certain state or federal courts located in Virginia (the "Forum-Selection Clause"). Joint Appendix ("J.A.") at 52-53 (1993 Agreement p 14). In addition to the Forum-Selection Clause, the 1994 Agreement contained an alternative dispute-resolution provision that required negotiation, mediation, and, in some circumstances, arbitration of disputes (the "ADR Clause").
In 1996 Security sued the defendants in the Western District of Tennessee alleging, inter alia, breach of express and implied warranties.1 Security alleged that certain products purchased under the dealer contracts were defective. The defendants moved to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b). The district court granted the motion on two grounds. First, the court held that Security was barred from proceeding against Sentinel in Tennessee by the Forum-Selection Clause of the agreements. Second, the court held that the ADR Clause of the 1994 Agreement was applicable to 1994 and pre-1994 claims against both defendants and also precluded litigation in Tennessee. Security filed a timely notice of appeal. This court's jurisdiction over the appeal is a matter of dispute that we will address before proceeding to the merits.
The defendants argue that under § 16 of the Federal Arbitration Act ("FAA"), 9 U.S.C. § 16, this court lacks jurisdiction to hear this appeal. Subject to limited exceptions that are not at issue here, § 16(b) provides that no appeal may be taken from an interlocutory order of the district court compelling arbitration or directing arbitration to proceed under the FAA. For two reasons we conclude that § 16 does not divest this court of jurisdiction in this instance.
First, in contrast to the prohibition on appeals of interlocutory orders, § 16(a)(3) permits an appeal to be taken from a final decision with respect to arbitration. This court has held that an order dismissing an action in favor of arbitration is a final order appealable under § 16(a)(3). See Arnold v. Arnold Corp., 920 F.2d 1269, 1275-76 (6th Cir.1990). The present action was dismissed by the district court.
Second, even if Arnold were not controlling, it cannot be said that this action was disposed of in favor of arbitration. To be sure the district court based its dismissal of Security's action, in part, on the preclusion of the Tennessee forum by the ADR Clause of the 1994 Agreement. That provision requires the parties to negotiate any dispute for forty-five days and then to mediate any unresolved matters in New Jersey. If mediation is not successful, the provision requires the parties to enter into binding arbitration in New Jersey if the amount in controversy is less than $1 million. If the amount in controversy exceeds $1 million, the parties may mutually agree to arbitrate or the aggrieved party may sue in New Jersey. See J.A. at 78-79 (1994 Agreement p 13). However, the district court did not determine the amount in controversy and thus did not determine whether arbitration would be required under the agreement if preliminary resolution efforts failed. The district court simply dismissed the action, because in any event the agreement precluded litigation in Tennessee.
The defendants have cited no authority for the proposition that the mere possibility that arbitration will be required under a contractual dispute-resolution process is sufficient to bar an immediate appeal under the FAA. Although it is the policy of the FAA to defer the appeal of an order compelling arbitration, it is not the purpose of that Act, or of any other statute or rule, to defer the appeal of a determination regarding a geographic forum-selection provision. Because it was the geographic forum-selection provision of the ADR Clause rather than the arbitration provision, per se, that provided the grounds for the district court's dismissal of this action, § 16(b) is not applicable to this appeal. Thus, this court has jurisdiction pursuant to 28 U.S.C. § 1291.
The district court granted the defendants' motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b). The district court held that (1) dismissal of the claims against both defendants was required by the ADR Clause of the 1994 Agreement and (2) dismissal of the claims against Sentinel was dictated by the Forum-Selection Clause included in all of the agreements. We will review the two bases for dismissal sequentially and de novo.21. Dismissal Based on the ADR