51 F.4th 693
7th Cir.2022Background
- Rock Hemp contracted to buy 6,000 hemp seeds from “CBDINC,” a fictitious business name used by Adam Dunn, Ryan Davies, and Shawn Kolodny; the order form contained an arbitration clause requiring binding arbitration in Denver.
- Rock Hemp sued the three individuals (not CBDINC) in Wisconsin state court asserting tort and warranty claims; the complaints did not specify a dollar demand but sought punitive damages, fees, and unspecified compensatory relief.
- On June 15, 2021 Rock Hemp’s counsel emailed a $250,000 damages demand; defendants removed to federal court on June 22, 2021.
- The district court denied Rock Hemp’s remand motion (finding removal timely and not waived), enforced the arbitration clause (dismissing under forum non conveniens / to compel arbitration), entered judgment for defendants, and denied a Rule 60 motion for reconsideration.
- Rock Hemp appealed; the Seventh Circuit affirmed the district court on timeliness/waiver of removal, enforceability and scope of the arbitration clause, and denial of Rule 60 relief.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Timeliness of removal (30‑day rule) | Rock Hemp: complaints and facts (seed invoice, punitive damages claim) put defendants on notice that amount in controversy exceeded $75,000 more than 30 days before removal | Defendants: 30‑day clock begins only when plaintiff affirmatively and unambiguously specifies a damages amount; first such specification was June 15 email | Affirmed: removal was timely; Walker control — clock starts when pleading/other paper clearly states amount in controversy |
| Waiver of right to remove by litigating in state court | Rock Hemp: defendants litigated in state court (motions to dismiss, status conference, discovery) and thus waived removal | Defendants: their pre-removal actions were routine defenses to avoid default and do not show clear, unequivocal intent to remain in state court | Affirmed: no waiver; Rothner rule stands — §1446(b) does not authorize remands for waiver absent full merits litigation in state court |
| Enforceability of arbitration clause; d/b/a and standing | Rock Hemp: contract void because CBDINC is a d/b/a and thus cannot form/enforce contracts; defendants lack standing (signature issues) | Defendants: Wisconsin law treats d/b/a as descriptive; the real parties (named defendants) can be bound and enforce the contract; no signature requirement shown | Affirmed: contract and arbitration clause valid; defendants have standing to enforce it under Wisconsin law (d/b/a is not a separate entity) |
| Fraudulent inducement to avoid arbitration | Rock Hemp: entire contract (including arbitration clause) void due to fraudulent misrepresentations about seed quality | Defendants: Prima Paint controls — allegations of fraudulent inducement of the contract generally do not avoid arbitration; only fraud directed at the arbitration clause itself is for courts to decide | Affirmed: Prima Paint/Buckeye Check principle applies — fraud-in-the-inducement of the whole contract is for arbitrator, so arbitration clause remains enforceable |
Key Cases Cited
- Walker v. Trailer Transit, Inc., 727 F.3d 819 (7th Cir. 2013) (30‑day removal clock starts when a paper affirmatively and unambiguously specifies the amount in controversy)
- Rothner v. City of Chicago, 879 F.2d 1402 (7th Cir. 1989) (§1446(b) cannot be interpreted to authorize remands on waiver grounds except after full merits litigation in state court)
- Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (U.S. 1967) (fraud-in-the-inducement of the entire contract does not avoid an arbitration clause)
- Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (U.S. 2006) (questions about the validity of the contract generally are for the arbitrator when an arbitration clause is at issue)
- Dr. Robert L. Meinders, D.C., Ltd. v. United Healthcare Servs., Inc., 7 F.4th 555 (7th Cir. 2021) (forum non conveniens is the proper procedural mechanism to enforce an arbitration clause)
- Sarauer v. Int'l Ass'n of Machinists, Dist. No. 10, 966 F.3d 661 (7th Cir. 2020) (standard of review for remand rulings)
- Colfax Envelope Corp. v. Local No. 458-3M, Chicago Graphic Commc'ns Int'l Union, 20 F.3d 750 (7th Cir. 1994) (courts will not allow unraveling an arbitration clause by attacking the contract generally)