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LPF II, LLC v. Cornerstone Systems, Inc.

United States District Court, D. Kansas

February 21, 2018

LPF II, LLC, Plaintiff,
v.
CORNERSTONE SYSTEMS, INC., Defendant.

          MEMORANDUM AND ORDER

          DANIEL D. CRABTREE UNITED STATES DISTRICT JUDGE.

         This matter comes before the court on defendant Cornerstone Systems, Inc.'s Motion to Dismiss or, in the Alternative, to Compel Arbitration or, in the Alternative, to Transfer (Doc. 6). Plaintiff LPF II, LLC has filed a response opposing the motion, and defendant has filed its Reply.

         For reasons explained below, the court denies defendant's motion to compel arbitration based on the current record. Instead, the court concludes that a summary trial is necessary to determine whether the Carrier Agreement requires the parties to this lawsuit to arbitrate their current disputes with one another. Given that conclusion, the court denies without prejudice the portion of defendant's motion seeking dismissal or transfer.[1]

         I. Background

         The facts recited here are taken from plaintiff's Complaint (Doc. 1-1) and the Carrier Agreement at issue in this lawsuit (Doc. 7-1). Although plaintiff does not attach the Carrier Agreement to its Complaint, the court may consider it because plaintiff references it in the Complaint. See GFF Corp. v. Associated Wholesale Grocers, Inc., 130 F.3d 1381, 1384 (10th Cir. 1997) (“[I]f a plaintiff does not incorporate by reference or attach a document to its complaint, but the document is referred to in the complaint and is central to the plaintiff's claim, a defendant may submit an indisputably authentic copy to the court to be considered on a motion to dismiss.”); Black & Veatch Int'l Co. v. Wartsila NSD N. Am., Inc., No. CIV.A. 97-2556-GTV, 1998 WL 953966, at *2 (D. Kan. Dec. 17, 1998) (deciding a Rule 12(b)(6) motion to dismiss and compel arbitration where the Complaint referenced the contract containing the arbitration provision without converting motion to one seeking summary judgment).

         A. The Carrier Agreement

         On March 18, 2014, defendant Cornerstone Systems, Inc. (“Cornerstone”) entered into a Carrier Agreement with two nonparties-Rail Logistics, L.C. (“Rail Logistics”) and Rail Logistics/Cold Train, L.C. f/k/a Cold Train, L.C. (“Cold Train”). Doc. 7-1; Doc. 1-1 at 3 ¶ 10. Cornerstone had served as a Registered Property Broker under the auspices of the Federal Motor Carrier Safety Administration. Doc. 7-1 at 1. Rail Logistics and Cold Train were the carriers. Rail Logistics and Cold Train each agreed to provide fleet management and other services to Cornerstone. And Cornerstone agreed to pay Rail Logistics and Cold Train for those services. Doc. 1-1 at 3 ¶ 8-10.

         The Carrier Agreement contains a “Disputes” provision. It provides:

In the event of a dispute arising out of this Agreement, including but not limited to Federal or State statutory claims, BROKER shall sole right to determine Arbitration or Litigation. Arbitration proceedings shall be conducted under the rules of the Transportation Arbitration and Mediation PLLC (TAM), or Transportation ADR Council, Inc. (ADR), upon mutual agreement of the Parties, or if no agreement, then at BROKER's sole discretion. Arbitration or Litigations proceedings shall be started within eighteen (18) months from the date of delivery or scheduled date of delivery of the freight, whichever is later. Upon agreement of the Parties, arbitration proceedings may be conducted outside of the administrative control of the TAM or ADR. The decision of the arbitrators shall be binding and final and the award of the arbitrator may be entered as judgment in any court of competent jurisdiction. The rationale and reasoning of the decision of arbitrator(s) shall be fully explained in a written opinion. The prevailing party shall be entitled to recovery of costs, expenses and reasonable attorney fees as well as those incurred in any action for injunctive relief, or in the event further legal action is taken to enforce the award of arbitrators. Arbitration proceedings shall be conducted at the office of the TAM or ADR nearest Memphis, Tennessee or such other place including by teleconference, or video conference, as mutually agreed upon in writing or directed by the acting arbitration association. Provided, however, either Party may apply to a court of competent jurisdiction for injunctive relief. Unless preempted or controlled by federal transportation law and regulations, the laws of the State of Tennessee shall be controlling notwithstanding applicable conflicts of laws rules. The arbitration provisions of this paragraph shall not apply to enforcement of the award of arbitration.
In the event of litigation the prevailing Party shall be entitled to recover costs, expenses and reasonable attorney fees, including but not limited to any incurred on appeals. Venue, controlling law, and jurisdiction in any legal proceedings shall be in Shelby County in the State of Tennessee not withstanding conflicts of laws and rules to the contrary.

Doc. 7-1 at 6.

         B. Rail Logistics and Cold Train's Accounts Receivable

         Some two years before defendant Cornerstone had entered into the Carrier Agreement with Rail Logistics and Cold Train, Rail Logistics and Cold Train had entered into a security agreement with Great Western Bank. This 2012 security agreement gave the bank a security interest in all assets owned by Rail Logistics and Cold Train. These secured assets included Rail Logistics and Cold Train's accounts receivable.

         In January 2016, plaintiff LPF II, LLC (“LPF”) and Great Western Bank agreed to settle a dispute they had with one another. In their settlement agreement, the bank assigned its interest in Rail ...


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