United States District Court, W.D. Oklahoma
OPTIMUM LABORATORY SERVICES LLC, an Oklahoma limited liability company, Plaintiff,
EAST EL PASO PHYSICIANS' MEDICAL CENTER, LLC, dba FOUNDATION SURGICAL HOSPITAL OF EL PASO, a Texas limited liability company Defendants.
L. RUSSELL, UNITED STATES DISTRICT JUDGE
case involves three disputes. First and at bottom is the
dispute over the merits: are Defendants liable to Plaintiff?
Second: Did the parties agree to arbitrate their dispute?
Third-and decisive to the Court's decision today:
Who-the arbitrator or this Court?- gets to decide
whether the parties agreed to arbitrate their claims? Because
the Court determines that the parties in fact agreed to let
an arbitrator and not this Court answer that question, the
Court will GRANT Defendants' Motions to Compel [Docs. 10
the answer to that third question, the Court need not dive
into the details of the underlying disagreement between the
parties. Suffice it to say that Plaintiff Optimum Laboratory
Services (“Optimum”) contracted to upgrade the
lab services at Defendant East El Paso Physicians'
Medical Center (“Foundation”). The parties'
Management Services Agreement for Clinical Diagnostic
Laboratory Services (the
“Agreement”) also called for Optimum to manage and
provide clinical lab services at Foundation in exchange for a
cut of the fees generated. Foundation was in turn supposed to
provide the lab space and a Medical Director who would
oversee compliance with regulations under state and federal
law. Also included in the Agreement, as discussed in more
detail below, were provisions requiring mediation, and if
necessary arbitration, should any dispute under the Agreement
arise. Optimum alleges that Foundation breached the Agreement
in September 2016 when, in response to an adjacent lab
company's failure to abide by regulations, Foundation
closed Optimum's lab space and shut down Optimum's
lab services. This, and Foundation's alleged failure to
pay Optimum hundreds of thousands of dollars owed under the
Agreement, has apparently damaged Optimum to the tune of more
than $7 million.
thus brings suit against Foundation for breach of contract,
negligence, tortious interference with business relations,
conversion, and indemnification. It also names
Foundation's CEO, Don Burris, as a Defendant to the
negligence and tortious interference claims. In response,
Foundation asks the Court to order arbitration under the
Federal Arbitration Act (“FAA”), or in the
alternative, to transfer this case to the United States
District Court for the Western District of Texas. Doc. 10.
Mr. Burris requests the same, as well as that this Court
dismiss him for lack of personal jurisdiction. Doc. 11. For
the reasons that follow, Defendants' Motions to Compel
Arbitration are GRANTED and the Court will order arbitration.
Consequently, the Court need not address whether venue is
proper or whether it has jurisdiction over Mr. Burris.
Standard of Review
resolving a motion to compel arbitration, the Court
“accept[s] as true . . . factual allegations . . . that
relate to the underlying dispute between the parties.”
Schnabel v. Trilegiant Corp., 697 F.3d 110, 113 (2d
Cir. 2012). “A party to an arbitration agreement
seeking to avoid arbitration generally bears the burden of
showing the agreement to be inapplicable or invalid.”
Harrington v. Atl. Sounding Co., Inc., 602 F.3d 113,
124 (2d Cir. 2010) (citing Green Tree Fin. Corp.-Ala. v.
Randolph, 531 U.S. 79, 91-92 (2000)).
Defendants, Foundation and its CEO Don Burris, have moved
this Court under the Federal Arbitration Act
(“FAA”) to compel Optimum to enter mediation and,
if necessary, arbitration. Defendants argue, moreover, that
an arbitrator should hear any challenges to the Agreement.
Optimum disagrees. It insists nothing in the agreement calls
for an arbitrator to decide issues of arbitrability, and even
if there were, that specific agreement between the parties is
itself contractually invalid.
Applicability of the FAA
governs all arbitration agreements in which the underlying
transaction involves commerce. Foster v. C.F. Turley,
Jr., 808 F.2d 38, 40 (10th Cir. 1986). The Act's
§ 2, its “primary substantive provision, ”
Rent-A-Center, 561 U.S. 63, 67 (2010), gives an
arbitration agreement legal validity by requiring a court to
A written provision in . . . a contract evidencing a
transaction involving commerce to settle by arbitration a
controversy thereafter arising out of such contract . . .
shall be valid, irrevocable, and enforceable, save upon such
grounds as exist at law or in equity for the revocation of
any contract.” 9 U.S.C. § 2.
agreements are therefore to be treated like any other
enforceable contract, which courts are able to do with the
FAA's enforcement provisions. Under § 3, a party may
apply to a federal court for a stay of the trial of any
action “upon any issue referable to arbitration under
an agreement in writing for such arbitration.” 9 U.S.C.
§ 3. Defendants have requested one such stay. Aggrieved
by Optimum's failure to mediate and/or arbitrate this
dispute, they have also invoked § 4 to request the court
“for an order directing that such arbitration proceed
in the manner provided for in [their] agreement.”
Id., § 4. Under the FAA, the Court may order
the parties to arbitrate so long as there is no factual issue
concerning the making of that agreement or the party's
failure to adhere to that agreement. Id.
federal dictates aside, only those disputes that the parties
have contracted to arbitrate should wind up in arbitration.
First Options of Chicago, Inc. v. Kaplan, 514 U.S.
938, 943 (1995). After all, “[t]he FAA reflects the
fundamental principle that arbitration is a matter of
contract.” Rent-A-Center, West, Inc. v.
Jackson, 561 U.S. at 67. The first question is thus
arbitrability, that is, whether the parties have agreed to
submit a particular dispute to arbitration. First
Options, 514 U.S. at 944. In other words, does the
arbitration agreement at hand apply to the present dispute?
And if so, is the arbitration agreement itself valid? The
Court determines the latter by “apply[ing] ordinary
state law principles that govern the formation of
contracts.” Id. Consequently, arbitration
agreements, like any other contract, are invalidated by
defenses such as “fraud, duress, or
unconscionability.” Rent-A-Center, 561 U.S. at
68. Assuming no party disputes that there is a valid
arbitration agreement, there is a “general presumption
that a particular issue is arbitrable.” Riley Mfg.
Co., Inc. v. Anchor Glass Container Corp., 157 ...