United States District Court, D. Kansas
MEMORANDUM AND ORDER
W. Lungstrum United States District Judge.
Construction, Inc. (“Carothers”) entered into a
subcontract with Seven Hills Construction, LLC (“Seven
Hills”) under which Seven Hills was to perform certain
work at a project in Kansas. In connection with that project,
Developers Surety and Indemnity Company (“DSI”)
issued performance and payment bonds, as surety, on behalf of
Seven Hills in favor of Carothers. Seven Hills defaulted on
the subcontract. Carothers subsequently initiated an
arbitration proceeding in Mississippi against DSI, in which
Carothers has asserted claims against DSI with respect to
bonds issued for the Kansas project and for projects in
Georgia, South Carolina, and Connecticut.
brought the present action in state court against Carothers,
who removed the case to this Court. By its complaint, DSI
seeks a declaratory judgment to the effect that it is not
required to submit to arbitration in Mississippi on
Carothers's claims, and it also seeks a stay of the
arbitration and a permanent injunction against the
arbitration of the claims.
matter presently comes before the Court on DSI's motion
to remand the case to state court (Doc. # 8) and
Carothers's motion to dismiss or to transfer (Doc. # 4).
For the reasons set forth below, the Court
denies both motions.
Motion to Remand
removing this case to federal court, Carothers invoked the
Court's diversity jurisdiction. DSI moves for remand on
the basis that the case does not satisfy the requirement that
the matter in controversy exceed $75, 000. See 28
U.S.C. § 1332(a).
argues that Carothers failed to submit evidence with its
notice of removal to satisfy the jurisdictional amount. The
Supreme Court has not required such evidence, however. In
Dart Cherokee Basin Operating Co., LLC v. Owens, 135
S.Ct. 547 (2014), the Court held that “a
defendant's notice of removal need include only a
plausible allegation that the amount in controversy exceeds
the jurisdictional threshold.” See Id. at 554.
That allegation “should be accepted when not contested
by the plaintiff or questioned by the court.” See
Id. at 553. If the plaintiff does contest the
allegation, then “both sides submit proof and the court
decides, by a preponderance of the evidence, whether the
amount-in-controversy requirement has been satisfied, ”
in accordance with the specific terms of the removal statute.
See Id. at 553-54; see also 28 U.S.C.
§ 1446(c)(2)(B) (removal is proper “if the
district court finds, by the preponderance of the evidence,
that the amount in controversy exceeds the amount specified
in section 1332(a)”) (quoted in Dart).
case, DSI does not seek monetary relief; instead, it seeks a
declaratory judgment and injunction relating to the
arbitration initiated by Carothers. In cases involving claims
for declaratory or injunctive relief, the Tenth Circuit
follows the “either viewpoint rule, ” which
allows the removing party to rely on either the value to the
plaintiff or the cost to the defendant of the relief sought.
See Lovell v. State Farm Mutual Auto. Ins. Co., 466
F.3d 893, 897 (10th Cir. 2006). DSI suggests in its brief
that the outcome of its suit to determine the appropriate
forum for Carothers's claims on the bonds has no
pecuniary effect because Carothers will have a forum for
those claims either way. The Tenth Circuit has implicitly
rejected such an argument, however, as it has held that in a
case seeking to compel arbitration, the court should look to
the possible award in the arbitration to determine the amount
in controversy. See Woodmen of World Life Ins. Society v.
Manganaro, 342 F.3d 1213, 1217 (10th Cir. 2003). The
Tenth Circuit has not explicitly extended that holding to
suits seeking to enjoin arbitration, but in Woodmen
it relied on and chose to follow the holding of the Fifth
Circuit in Webb v. Investacorp, Inc., 89 F.3d 252
(5th Cir. 1996). See Woodmen, 342 F.3d at 1217
(citing Webb). In Webb, the Fifth Circuit
concluded that there is no reason that the same rule should
not apply both to suits seeking to compel arbitration and to
suits seeking to enjoin arbitration. See Webb, 89
F.3d at 256-57. DSI has not argued that the Woodmen
rule should be not be applied in this case. Accordingly, the
Court believes that the Tenth Circuit would apply that rule
here, and thus it will do so. Thus, DSI's motion turns on
the amount sought by Carothers in the Mississippi
notice of removal, Carothers alleged that the amount in
controversy here exceeds $75, 000. The Court concludes that
that allegation was plausible in light of DSI's
complaint, to which DSI attached Carothers's arbitration
demand. In that demand, Carothers stated that it asserted
claims on bonds issued by DSI for four projects, including
the Kansas project; that its total claims exceeded $4, 000,
000; and that DSI had already determined that it would
sustain an additional loss of $380, 342 on the Kansas bonds.
DSI argues-and points to evidence that purports to show-that
Carothers has never made a formal claim to it on the bonds
for the Kansas project. The relevant issue, however, is the
amount sought by Carothers in the arbitration. In the
arbitration demand, Carothers has plainly asserted a claim
for monetary relief from DSI relating to the Kansas project,
as it claims that Seven Hills defaulted and that DSI has paid
only part of the amount due to Carothers as damages.
also attempts to take issue with the amount of
Carothers's claim in the arbitration demand as it relates
to the Kansas project. First, a close reading of DSI's
complaint in this case reveals that its request for relief is
not limited to the arbitration claims relating to the Kansas
project, as DSI seeks relief generally relating to the
arbitration as a whole; and Carothers explicitly seeks in
excess of $4, 000, 000 in the arbitration generally. In its
briefs in support of remand and in opposition to dismissal,
DSI appears to suggest that only the arbitration of claims
relating to the Kansas project are at stake in this action,
although it has not explicitly limited its claims in that
way. Even if only the arbitration claims relating to the
Kansas project are considered, however, the arbitration
demand still reveals a claim in excess of $75, 000. As
Carothers points out, the specific damage amounts claimed
with respect to the other three projects total approximately
$3, 800, 000, leaving the plausible interpretation that
Carothers seeks over $200, 000 for the Kansas project.
Moreover, the arbitration demand, in setting out the Kansas
claim, refers to DSI's admission that it still owes $380,
342 on that claim. DSI argues that the Court should not
consider any such admission. The Court must weigh the
evidence, however, and Carothers has provided evidence of
such an admission. Moreover, the issue is the amount of
Carothers's claim in arbitration (whether or not
it ultimately succeeds on that claim), and the evidence is
that Carothers has claimed an amount in excess of $75, 000.
That is especially true in light of Carothers's demand in
the arbitration for attorney fees and punitive damages.
See Woodmen, 342 F.3d at 1217-18 (claims for
attorney fees and treble damages may be considered for
purposes of meeting the jurisdictional amount).
the Court concludes that Carothers plausibly alleged in its
notice of removal that the jurisdictional threshold is
satisfied here, based on the evidence of the arbitration
demand. DSI has not submitted any contrary evidence, either
that Carothers does not in fact claim that much or that
Carothers cannot recover that much. Thus, the Court also
finds by a preponderance of the evidence that the
amount-in-controversy requirement is satisfied in this case.
It therefore denies DSI's motion to remand the case to
Motion to Dismiss or to Transfer
claims in this case are based solely on its argument that it
is not required to submit to the arbitration initiated by
Carothers. Carothers takes the opposite view, arguing that a
written arbitration provision should be enforced against DSI.
Based on that argument, Carothers moves either for dismissal
of DSI's claims or, in the alternative, for transfer of
the case to the United States District Court for the Southern
District of Mississippi to allow DSI to be compelled to
submit to the arbitration initiated in that state.
See 9 U.S.C. § 4 (under Federal Arbitration
Act, district court may compel arbitration only within its
own district); accord Ansari v. Qwest Communications
Corp., 414 F.3d 1214, 1219-20 (10th Cir. 2005).
Federal Arbitration Act (FAA) provides that an arbitration
provision in a written commercial contract “shall be
valid, irrevocable, and enforceable, save upon such grounds
as exist at law or in equity for the revocation of any
contract.” See 9 U.S.C. § 2. The FAA
creates a presumption in favor of arbitration, as the Supreme
Court has held that the statute “establishes that, as a
matter of federal law, any doubts concerning the scope of
arbitrable issues should be resolved in favor or arbitration,
whether the problem at hand is the construction of the
contract language itself or an allegation of waiver, delay,
or a like defense to arbitrability.” See Moses H.
Cone Mem. Hosp. v. Mercury Constr. Corp., 460 U.S. 1,
24-25 (1983) (footnote omitted). In enforcing this federal
policy favoring arbitration, courts apply state-law
principles concerning the validity, revocability, and
enforceability of contracts, as long as those state-law
principles are generally applicable to all contracts and not
applicable only to arbitration agreements. See Perry v.
Thomas, 482 U.S. 483, 492 n.9 (1987). The Supreme Court
has further stressed, however, that the parties must have
agreed to arbitrate the dispute in the first place:
The FAA directs courts to place arbitration agreements on
equal footing with other contracts, but it does not require
parties to arbitrate when they have not agreed to do so.
Because the FAA is at bottom a policy guaranteeing the
enforcement of private contractual arrangements, we look
first to whether the parties agreed to arbitrate a dispute,
not to general policy goals, to determine the scope of the
agreement. While ambiguities in the language of the agreement
should be resolved in favor of arbitration, we do not
override the clear intent of the parties, or reach a result
inconsistent with the plain text of the contract, simply
because the policy favoring arbitration is implicated.
See EEOC v. Waffle House, Inc., 534 U.S. 279, 293-94
(2002) (citations and internal quotations omitted). Thus, the
Court must determine here whether DSI agreed to arbitrate