United States District Court, D. South Dakota, Southern Division
MEIERHENRY SARGENT LLP, a South Dakota limited liability partnership Plaintiff,
BRADLEY WILLIAMS and KERRY WILLIAMS, Defendants.
MEMORANDUM OPINION AND ORDER ON DEFENDANTS'
MOTION TO STAY ACTION AND COMPEL ARBITRATION
LAWRENCE L. PIERSOL ATTEST UNITED STATES DISTRICT JUDGE
before the Court is Defendants' pre-answer Motion to Stay
Action and Compel Arbitration for claims asserted in Count II
of Plaintiffs Complaint pursuant to the Federal Arbitration
Act, 9 U.S.C. § 1 etseq., and Federal Rule of
Civil Procedure 12(b)(1). Doc. 7. The motion has been fully
briefed, and for the reasons set forth below, Defendants'
motion will be granted.
some disputed questions of fact remain, the Court accepts as
true the following facts for purposes of this memorandum
opinion and order. See Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 247-48 (1986) (emphasis in original)
(finding that "the mere existence of some
alleged factual dispute between the parties will not defeat
an otherwise properly supported motion [to compel
arbitration]; the requirement is that there be no
genuine issue of material fact").
and part of 2016, Defendants, residents of Mendota Heights,
Minnesota, owned agricultural land in Lincoln County, South
Dakota. During this time, Dakota Access, LLC ("Dakota
Access") was attempting to acquire easements from
landowners in various counties, including Lincoln County, in
order to build an oil pipeline. In January of 2015, Defendants
hired Plaintiff, a Sioux Falls, South Dakota law firm, to
advise and consult with them about various legal matters
related to the proposed pipeline ("First
Hiring"). The First Hiring representation ended
sometime before October of 2015.
October of 2015, Dakota Access initiated an eminent domain
action against Defendants. In December of 2015, Defendants
retained Plaintiff to represent them in these proceedings
("Second Hiring"). Plaintiff and the Defendants
entered into an Attorney Fee Contract
("Contract"). The Contract provided that the
Defendants would pay Plaintiff one-third of the amount of
settlement negotiated by the Plaintiff, less the $101, 082.56
settlement offer negotiated by the Defendants prior to
retaining Plaintiff. The Contract also contained a "FEE ON
TERMINATION" clause, which provided:
4.FEE ON TERMINATION. If Client terminates
Firm's employment before conclusion of the case without
good cause, Client shall pay Firm a fee and expenses based on
the fair and reasonable value of the services performed by
Firm before termination. If any disagreement arises about
the termination fee, the client may choose two persons from a
service profession, and the firm may choose one person. The
firm will be bound by a majority decision of the three
persons as to a fair fee. If the Firm terminates the
representation, then it shall receive no fee or
the approximately two months in which Plaintiff represented
the Defendants, Plaintiff obtained a settlement offer from
Dakota Access for $750, 000. Thereinafter, on or about March
8, 2016, the Defendants terminated Plaintiffs
representation. In the days following this termination,
however, discussions continued between the
parties. On March 11, 2016, the Defendants emailed
Plaintiff a revised contract proposal in which Plaintiff
would be entitled to collect fees on a settlement that
exceeded $950, 000 and Plaintiff would be responsible for all
of its expenses. Plaintiff declined the alternative
the next several months, Defendants continued negotiations
with Dakota Access. Ultimately, Defendants sold the subject
property in fee to Dakota Access. On May 11, 2016,
Plaintiff filed an Attorney's Lien in state court for
$229, 054.88 against Dakota Access and
Defendants. On June 14, 2016, Plaintiff emailed
Defendants' new counsel, Edward Sheu, in an attempt to
privately settle the attorney fee dispute. On June 28,
2016, Attorney Sheu responded to Plaintiffs email by
highlighting the procedure, as set forth in the Contract, to
settle an attorney fee dispute, and noting the alleged
deficiencies in Plaintiffs representation, specifically that
if Plaintiff made a claim for recovery of legal fees it would
be met with malpractice and ethics violations
November 17, 2016, Plaintiff filed a two-count Complaint
against Defendants in Minnehaha County state court. In its
Complaint, Plaintiff alleged that it is due $593.60, plus
interest and costs, for the First Hiring (Count I), and $216,
305.81, plus interest and costs, for the Second Hiring (Count
II). On December 30, 2016, Defendants filed a
timely notice of removal pursuant to 28 U.S.C. §1332. On
January 6, 2017, Defendants filed the current motion
requesting the Court to stay the action and compel
arbitration of Count II pursuant to the Federal Arbitration
Act, 9 U.S.C. § 1 etseq., and Federal Rule of
Civil Procedure 12(b)(1). In opposition to the motion,
Plaintiff argues that Defendants repudiated the Contract,
including the arbitration clause, and therefore the parties
are no longer contractually bound to arbitrate.
STANDARD OF REVIEW
Federal Arbitration Act does not identify what evidentiary
standard a party seeking to avoid arbitration must meet.
Neb. Mach. Co. v. Cargotec Solutions, LLC, 762 F.3d
737, 741-42 (8th Cir. 2014); see also Henry Techs.
Holdings, LLC v. Giordano, 2014 WL 3845870, at *3 (W.D.
Wis. Aug. 5, 2014) ("The FAA does not define a standard
for a district court's determination of a motion to
compel arbitration[.]"). Courts that have addressed the
issue have used a summary judgment standard. Id.; see
also Schwalm v. TCF Nat'l Bank, 2016 WL 7468016, at
*2 (D.S.D. Dec. 28, 2016); Technetronics, Inc. v.
Leybold-Graeus GmbH, 1993 WL 197028, at *2 (E.D. Pa.
June 9, 1993) ("[I]n a motion to stay proceedings and/or
compel arbitration, the appropriate standard of review for
the district court is the same standard used in resolving
summary judgment motions pursuant to [Federal Rule of Civil
Procedure] 56(c)."). Therefore, the court may consider
all evidence in the record, viewing that evidence in the
light most favorable to the non-moving party. Id.; see
also Lee v. Credit Acceptance Corp., 2015 WL 7176374, at
*1 (W.D. Wis. Nov. 12, 2015).
the Federal Arbitration Act ("FAA"), Congress
sought to establish a strong federal policy favoring the
enforcement of arbitration agreements. Shearson/Am. Exp.,
Inc. v. McMahon, 482 U.S. 220 (1987). Enacted in 1925,
the FAA's goal was to "revers[e] centuries of
judicial hostility to arbitration agreements" by
"plac[ing] arbitration agreements 'upon the same
footing as other contracts.'" Scherk v.
Alberto-Culver Co., 417 U.S. 506, 511 (1974) (quoting
H.R. Rep. No. 97, 68th Cong., 1st Sess., 1, 2 (1924));
see also Rent-A-Center, W., Inc. v. Jackson, 561
U.S. 63, 67 (2010) (internal citations omitted) (finding that
"[t]he FAA reflects the fundamental principle that
arbitration is a matter of contract[, ]" and thus
"requires courts to enforce them according to their
terms[.]"). Sections 3 and 4 of the FAA are key to the
present motion. 9 U.S.C.A. §§ 3-4. Section 3 allows
federal courts to stay proceedings of issues referable to
arbitration. 9 U.S.C.A. § 3. Section 4 directs courts to
compel the parties to arbitration pursuant to the terms of
their written arbitration agreement. 9 U.S.C. § 4;
see also Kubista v. Value Forward Network, LLC, 2012
WL 2974675, at *2 (D.S.D. July 20, 2012).
terms, the FAA "leaves no place for the exercise of
discretion by a district court, but instead mandates that
district courts shall direct the parties to proceed
to arbitration on issues as to which an arbitration agreement
has been signed." Dean Witter Reynolds, Inc. v.
Byrd, 470 U.S. 213, 217 (1985) (emphasis in original).
"A court's role under the FAA is therefore limited
to determining (1) whether a valid agreement to arbitrate
exists and, if it does, (2) whether the agreement encompasses
the dispute." Pro Tech Indus., Inc. v. URS
Corp., 377 F.3d 868, 871 (8th Cir. 2004). "If these
requirements are met, the FAA allows the court to stay
proceedings and compel the parties to arbitrate."
Precision Press, Inc. v. MLP U.S.A., Inc., 620
F.Supp.2d 981, 989-90 (N.D. Iowa 2009).
Whether state or federal law applies
the record before the Court demonstrates that the parties
assume that the FAA is applicable in the present case, the
Court must first answer the threshold question of whether
state or federal law applies. Id. at 990.
construction of an agreement to arbitrate is governed by the
FAA unless the agreement expressly provides that state law
should govern." Dominium Austin Partners, LLC v.
Emerson, 248 F.3d 720, 729 n.9 (8th Cir. 2001); see
also Volt Info. Scis., Inc. v. Bd. of Trustees of
Leland Stanford Junior Univ., 489 U.S. 468, 479 (1989)
(finding that the FAA is a matter of consent, nor coercion,
and does not prevent the enforcement of agreements to
arbitrate under different rules than those set forth in the
Act). Thus, the Court "will not interpret an arbitration
agreement as precluding the application of the FAA unless the
parties' intent that the agreement be so construed is
abundantly clear." UHC Mgmt., Co. v. Computer
Sciences, Corp., 148 F.3d 992, 996-97 (8th Cir. 2001).
In UHC Mgmt, for example, the contract contained a
choice-of-law clause, but the included arbitration agreement
was silent as to whether state or federal arbitration law
applied. Id. at 994, 997. In holding that the FAA
was applicable, the Eight Circuit stated:
The agreement makes no reference to the Minnesota Uniform
Arbitration Act or to Minnesota case law interpreting the
allocation of powers between arbitrators and courts.
Moreover, the choice-of-law clause itself specifically
provides that Minnesota law must yield whenever preempted by
federal law, which ...