City of Benkelman, NE v. Baseline Engineering Corp.
2017 U.S. App. LEXIS 14876
| 8th Cir. | 2017Background
- The City of Benkelman, NE contracted with Baseline Engineering (CO) to design/build a water treatment plant after state orders to remediate contaminants; USDA-RD partially funded the project.
- Two written agreements exist: a July 2009 short contract with a mandatory Colorado binding-arbitration clause and Colorado choice-of-law, and an August 2009 EJCDC standard-form agreement (approved by USDA-RD) that was incorporated as Exhibit B into the July contract but includes a different (non-mandatory) dispute resolution clause and Nebraska choice-of-law.
- The plant failed to meet uranium standards; the City sued Baseline in federal court in Nebraska for breach of contract, negligence, fraud, and related claims seeking > $5.5M.
- Baseline moved to dismiss, arguing the July 2009 arbitration/forum-selection clause requires arbitration in Colorado; the district court treated the motion as a Rule 12(b)(1) factual challenge, found the contracts must be construed as one, held the July contract controlled, and dismissed for lack of jurisdiction, directing arbitration in Colorado.
- On appeal the Eighth Circuit held arbitration provisions do not strip federal courts of subject-matter jurisdiction, rejected the Rule 12(b)(1) characterization, and concluded the motion must be analyzed under summary-judgment standards (Rule 56) or Rule 12(b)(6) treated as Rule 56 because the district court considered extrinsic evidence.
- The Eighth Circuit reversed and remanded for the district court to apply summary-judgment standards (and to address any factual issues) rather than dismissing for lack of jurisdiction.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether an arbitration clause divests federal courts of subject-matter jurisdiction | City: arbitration does not defeat jurisdiction; Baseline must proceed under 12(b)(6) or 56 | Baseline: arbitration/governing contract deprives the court of jurisdiction; district court correctly applied 12(b)(1) | Court: arbitration clause does not strip subject-matter jurisdiction; 12(b)(1) was improper |
| Which contract governs (July 2009 contract vs August EJCDC Agreement) | City: the USDA-approved August EJCDC Agreement supersedes the July contract; its dispute clause governs | Baseline: July contract controls (incorporates EJCDC as Exhibit B but has controlling merger/conflict clauses) | Court: contracts raise ambiguous, fact-intensive issues; district court should resolve under summary-judgment/fact-finding, not on 12(b)(1) motion |
| Proper procedural vehicle to enforce arbitration/forum-selection | City: Baseline’s motion should be treated under Rule 12(b)(6) or Rule 56 | Baseline: district court correctly treated it as a Rule 12(b)(1) factual jurisdictional challenge | Court: motions to enforce arbitration need not be framed as Rule 12(b)(1); Rule 12(b)(6) or Rule 56 analysis is appropriate and, because extrinsic evidence was considered, summary-judgment standards apply |
| Whether appellate court should decide merits now or remand | City: district court should resolve factual disputes and summary-judgment issues first | Baseline: contends dismissal and arbitration in Colorado were appropriate | Court: reversed and remanded so the district court can apply summary-judgment standards and resolve fact-intensive issues first |
Key Cases Cited
- Branson Label, Inc. v. City of Branson, 793 F.3d 910 (8th Cir. 2015) (distinguishing facial and factual Rule 12(b)(1) challenges)
- Osborn v. United States, 918 F.2d 724 (8th Cir. 1990) (party asserting jurisdiction bears burden in a factual 12(b)(1) challenge)
- Atlantic Marine Constr. Co. v. United States Dist. Court for the W. Dist. of Tex., 134 S. Ct. 568 (2013) (forum-selection clauses are not enforced via Rule 12(b)(3))
- U.S. for Use of Lightning & Power Servs., Inc. v. Interface Constr. Corp., 553 F.3d 1150 (8th Cir. 2009) (upholding interlocutory treatment of arbitration motion styled under Rule 12(b)(1))
- Thompson v. Air Transp. Int’l Ltd. Liab. Co., 664 F.3d 723 (8th Cir. 2011) (arbitration enforced under statutory jurisdictional allocation in Railway Labor Act context)
- Guidotti v. Legal Helpers Debt Resolution, L.L.C., 716 F.3d 764 (3d Cir. 2013) (courts may apply summary-judgment-type analysis when deciding arbitrability)
- Neb. Mach. Co. v. Cargotec Solutions, LLC, 762 F.3d 737 (8th Cir. 2014) (motions to compel arbitration accompanied by affidavits/exhibits should be treated under summary-judgment standards)
- Kindred Nursing Centers Ltd. P’ship v. Clark, 137 S. Ct. 1421 (2017) (addressed scope of the Federal Arbitration Act; noted by the court but not dispositive here)