ORGANIZATIONAL STRATEGIES, INC.; Intеgration Casualty Corp.; Systems Casualty Corp.; Optimal Casualty v. FELDMAN LAW FIRM LLP; Stewart A. Feldman; Capstone Associated Services Wyoming LP; Capstone Associated Services Ltd.; Capstone Insurance Management Ltd., Appellants.
No. 14-1704.
United States Court of Appeals, Third Circuit.
March 20, 2015.
116
Kelly E. Farnan, Esq., Katharine C. Lester, Esq., Blake K. Rohrbacher, Esq., Richards, Layton & Finger, Wilmington, DE, E. John Gorman, Esq., The Feldman Law Firm, Houston, TX, for Appellants.
OPINION *
RENDELL, Circuit Judge:
This appeal is but another step in the protracted litigation in the courts of Delaware and Texas over the meaning and effect of an arbitration clause in an agreement between Appellants, the Capstone Parties,1 and Appellees, the OSI Parties.2 The Capstone Parties appeal from an order of the Dеlaware District Court granting their motion for clarification3 and from an order of the Delaware District Court compelling their participation in arbitration. Concluding that the District Court‘s rulings were sound, we will affirm.
I. Background4
The OSI Parties engaged the Feldman Law Firm, one of the Capstone Parties, to create captive insurance companies.5 Attached to the engagement letter were the Feldman Law Firm‘s billing guidelines, which contained an arbitration clause, and the Capstone Services Agreement, which provided that venue and jurisdiction shall be in Delaware for all disputes, other than intellectual property disputes.
On March 12, 2013, the Capstone Parties filed an arbitration demand against the OSI Parties in Houston alleging that the OSI Parties breached their contract. The OSI Parties then filed a complaint in the Delaware Court of Chancery, alleging breach of contract, professional malpractice, and breach of fiduciary duties. The OSI Parties also filed a motion for a temporary restraining order to stoр the Texas arbitration. The Capstone Parties removed the case to Delaware District Court and filed a motion to dismiss for lack of subject matter jurisdiction because the parties had a valid аrbitration agreement.
On February 12, 2014, the Delaware District Court dismissed the case for lack of subject matter jurisdiction because it determined that the parties’ agreement required arbitration. Its order statеd, without referencing arbitration, that the Capstone Parties’ motions to dismiss for lack of subject matter jurisdiction were granted. That same day, the OSI Parties filed an arbitration demand in Delaware.
In its opinion, thе District Court referenced “venue in Delaware” and stated that “disputes must be resolved by a Delaware arbitrator.” (App. A-16, A-18.) The Capstone Parties filed a motion to clarify whether the opinion and оrder had held that arbitration must be in Delaware with a Delaware arbitrator, urging that it did not so require. On May 29, 2014, the District Court granted the motion for clarification. It noted that “venue is a procedural issue which is left tо the arbitrator” and “[i]t appears that certain language
On March 13, 2014, the OSI Parties filed a mоtion to compel arbitration. The Capstone Parties argued that the District Court lacked jurisdiction to compel arbitration because it had closed the case when it granted the motions to dismiss. Thе District Court disagreed because
The Capstone Parties appeal the District Court‘s clarification order and its order compelling arbitration.
II. Analysis
First, the Capstone Parties arguе that there is no Article III controversy because they never refused to arbitrate. This argument lacks merit since the Capstone Parties clearly did refuse to arbitrate in Delaware. Second, the Cаpstone Parties argue that the Delaware District Court erroneously incorporated the Capstone Services Agreement, which contains the Delaware venue clause, into their agreеment. This argument is baffling because, in one of their briefs, the Capstone Parties stated, “[i]t is clear ... that the Capstone Services Agreement, and the retention agreement are integrated agreements.” (App. B-319.) The District Court noted this fact, stating that the parties “agree that the Engagement Letter and Services Agreement are part of an integrated agreement.” (App. A-15 (emphasis added).) The District Court did not err in concluding that the Capstone Services Agreement was binding on the parties to the engagement letter.6
Third, the Capstone Parties argue that the District Court improperly ordered the mandatоry arbitration venue to be in Delaware. We disagree. The District Court dismissed for lack of subject matter jurisdiction. Then the OSI Parties immediately filed an arbitration demand in Delaware and moved to compеl the Capstone Parties’ participation. The District Court
Fourth, the Capstone Parties argue that the OSI Parties’ motion to compel arbitration was procedurally flawed because it was not filеd pursuant to Rules 59(e) or 60(b) and because it was tantamount to filing a new complaint seeking arbitration without permission to amend. These arguments miss the mark. The issue is whether a district court can compel аrbitration after determining that it lacks subject matter jurisdiction because a dispute must be arbitrated. The Capstone Parties have not cited any authority for the proposition that a District Court cannot compel arbitration after dismissing a suit based on an arbitration clause. Granted, the circumstances here are somewhat unusual because the Capstone Parties originally urged that the matter should be arbitrated, but then altered their position and urged that the Delaware arbitration should not occur. But this does not mean that the District Court erred.
Finally, the Capstone Parties raise several arguments thаt we need not discuss at length. The Capstone Parties argue that the Delaware arbitrator was not neutral because he never disclosed his financial dealings. The Capstone Parties failed to rаise this issue before the District Court and, therefore, they waived it. See Huber v. Taylor, 469 F.3d 67, 74 (3d Cir. 2006) (“Generally, failure to raise an issue in the District Court results in its waiver on appeal.“). The Capstone Parties also argue that the deadline for the Delaware arbitration had expired. The District Court refused to consider this issue because he held that the arbitrator should decide the time limit issue. We agree. Finally, the Capstone Parties аrgue that the OSI Parties waived their right to arbitrate by acting inconsistently with the intent to arbitrate, but this issue is being litigated in another suit, and we will not address it here. Furthermore, while the Capstone Parties cited case authоrity setting forth factors for determining whether a party has waived a right to arbitration, the issue in those cases was whether, in light of the parties’ extensive litigation before urging that the case should be arbitrated, waiver has occurred. This was not the situation before the District Court because the litigation in this case has always been about the right to arbitration. The Capstone Parties seek a ruling that the OSI Parties waivеd their right to arbitrate in Delaware, but they have not cited any authority for the proposition that a party can waive its right to arbitrate in a particular location.
Accordingly, we will affirm.