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Inc. v. The Cherokee 8A Group, Inc.

United States District Court, S.D. Ohio, Eastern Division

July 15, 2019

BJ'S ELECTRIC, INC., Plaintiff,
THE CHEROKEE 8A GROUP, INC., et al., Defendants.

          Elizabeth Preston Deavers Magistrate Judge



         This matter is before the Court on the Defendants' Motion to Dismiss or Stay Pending Arbitration. (ECF No. 9). Plaintiff filed a Memorandum Contra to the Motion (ECF No. 19) and the Defendants have replied (ECF No. 20). The matter is now ripe for decision.

         I. BACKGROUND

         Plaintiff BJ's Electric, Inc. initiated this action on October 9, 2018, in the Court of Common Pleas in Ross County, Ohio. (ECF No. 4). Defendants timely removed the action to this Court pursuant to 28 U.S.C. §§ 1332(a) and 1441, et seq., because the matter in controversy exceeds $75, 000.00, exclusive of interest and costs, and the matter in controversy is between citizens of different states. (ECF No. 1).

         According to the Complaint, Defendant Cherokee 8A Group, Inc. was the successful bidder on a construction contract with the Chillicothe Veterans Administration to repair Building 31 as the prime contractor. (¶ 4, ECF No. 4). Defendant Cherokee subcontracted with Plaintiff to perform Division D, the electric portion, of the construction contract. (Id. ¶ 5). Plaintiff asserts that all work was performed under the contract, but that Defendant Cherokee materially breached the contract. (Id. ¶¶ 6-14). Plaintiff brings claims against Defendant Cherokee for declaratory judgment, breach of contract, violation of New Jersey's Prompt Payment statute, and bad faith.

         Plaintiff further alleges that Defendant Liberty Mutual Surety is a business unit of the Liberty Mutual Group that provides services to the Liberty Mutual Group's member companies, including Liberty Mutual Insurance Company. (Id. ¶ 3). Plaintiff alleges that the Liberty Mutual Defendants, collectively, were the surety on the construction contract. Plaintiff alleges that it filed a surety claim but that its claim was rejected by the Liberty Mutual Defendants. (Id. ¶¶ 26- 28). Plaintiff brings claims against the Liberty Mutual Defendants on the surety, under New Jersey's Prompt Payment statute, and for bad faith.

         After removing the action, Defendants collectively moved to dismiss the action or to stay all claims pending arbitration. (ECF No. 9).


         The standard for ruling on Defendants' Motion is dictated by the Federal Arbitration Act (“FAA”), 9 U.S.C. § 1, et seq., which provides that “[a] party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration may petition” for an order compelling arbitration. 9 U.S.C. § 4. “[U]pon being satisfied that the issue involved in such suit or proceeding is referable to arbitration[, ]” a court “shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration.” Id. § 3.

         The FAA manifests “a liberal federal policy favoring arbitration agreements.” Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983); see also 9 U.S.C. §§ 1-16; Shearson/Am. Express, Inc. v. McMahon, 482 U.S. 220, 226, (1987); Stachurski v. DirecTV, Inc., 642 F.Supp.2d 758, 764 (N.D. Ohio 2009). The Act sets up “a presumption in favor of arbitration, ” Marchetto v. DeKalb Genetics Corp., 711 F.Supp. 936, 938 (N.D. Ill. 1989) (citing Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, 473 U.S. 614, 625 (1985) and Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 24-25 (1983)), and requires that courts “rigorously enforce agreements to arbitrate.” Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 221 (1985).

         “To enforce this dictate, [the FAA] provides for a stay of proceedings when an issue is referable to arbitration . . . .” Javitch v. First Union Sec., Inc., 315 F.3d 619, 624 (6th Cir. 2003) (citing 9 U.S.C. §§ 3-4). In cases where all claims are referred to arbitration, the litigation may be dismissed rather than merely stayed. Hensel v. Cargill, Inc., No. 99-3199, 198 F.3d 245 (table), 1999 WL 993775, at *4 (6th Cir. Oct. 19, 1999); Alford v. Dean Witter Reynolds Inc., 975 F.2d 1161, 1164 (5th Cir. 1992) (holding that dismissal is proper where all claims must be submitted to arbitration).

         If the validity of an arbitration agreement is “in issue, ” the court must hold a trial to resolve the question. 9 U.S.C. § 4. “In order to show that the validity of the agreement is ‘in issue,' the party opposing arbitration must show a genuine issue of material fact as to the validity of the agreement to arbitrate.” Great Earth Cos., Inc. v. Simons, 288 F.3d 878, 889 (6th Cir. 2002). “The required showing mirrors that required to withstand summary judgment in a civil suit.” Id. A district court, therefore, must view all facts and inferences in the light most favorable to the party opposing arbitration and determine “whether the evidence presented is such that a reasonable finder of fact could conclude that no valid agreement to arbitrate exists.” Id.

         The Sixth Circuit applies a four-pronged test to evaluate a motion to dismiss or stay the ...

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