BRM Trades, LLC v. All-Ways Forwarding Int'l Inc.

Background

BRM alleged that DRE bought 68 containers of medical gloves from a manufacturer in China and arranged for All-Ways, a common carrier, to ship them under bills of lading. After the goods arrived in the United States, All-Ways allegedly asserted a maritime lien because DRE had unpaid invoices. BRM alleged that it paid DRE approximately $3 million for title to the goods after receiving assurances that DRE would use the money to pay All-Ways and that All-Ways would then release the goods to BRM. BRM claimed that All-Ways later sold the goods to third parties and that DRE refused to direct All-Ways to release them.

BRM sued All-Ways for breach of contract and fraud and later added similar claims against DRE. DRE had already sued BRM in Missouri concerning the goods and the purchase agreement. BRM removed that Missouri case to federal court and asserted counterclaims against DRE for breach of contract and fraud.

Jurisdiction

The defendants moved to dismiss under Rules 12(b)(1), 12(b)(2), and 12(b)(6), including arguments that the court lacked subject-matter and personal jurisdiction. The court rejected those arguments. It held that the bill of lading was a maritime contract supporting admiralty jurisdiction, and that the related claims fell within supplemental jurisdiction. It also held that diversity jurisdiction existed because the parties were citizens of different states and the amount in controversy exceeded $75,000.

As to personal jurisdiction, the court held that All-Ways consented to jurisdiction in the Southern District of New York through the bill of lading’s mandatory forum-selection clause. The court held that DRE had sufficient contacts with New York because it purposefully arranged to sell and ship millions of dollars of medical gloves into the state.

All-Ways and Arbitration

The bill of lading contained an arbitration clause requiring disputes under the bill of lading to be resolved by arbitration administered by the American Arbitration Association in New York. It also contained a forum-selection clause stating that suits against the carrier must be brought in the Southern District of New York. The court treated All-Ways’s dismissal motion as a motion to compel arbitration because All-Ways alternatively asked the court to require arbitration.

The court held that BRM accepted the bill of lading’s terms by suing as a person included within the bill of lading’s definition of Merchant. The court rejected BRM’s argument that the arbitration clause conflicted with the forum-selection clause. It interpreted the provisions together: the parties must arbitrate their disputes, while the Southern District of New York would retain jurisdiction over court proceedings such as enforcing or challenging an arbitration award or the arbitration agreement. The court also rejected BRM’s argument that the arbitration clause was unenforceable because it was absent from a sample bill of lading filed with the Federal Maritime Commission. The court concluded that the tariff rule at issue applied to provisions affecting rates, not arbitration or forum-selection provisions.

The court found that the arbitration clause was narrow because it covered disputes under the bill of lading, rather than all disputes related to or connected with it. Even so, the court held that both BRM’s contract and fraud claims against All-Ways fell within the clause. The contract claim concerned All-Ways’s alleged obligations under the bill of lading, and the fraud claim concerned alleged representations about All-Ways’s performance under that document. The court therefore granted All-Ways’s motion to compel arbitration and ordered BRM and All-Ways to arbitrate their dispute.

The court stayed the action as to All-Ways while arbitration proceeded.

DRE and the Missouri Action

DRE asked the court to dismiss BRM’s claims against it or transfer them to the earlier-filed Missouri Action. The court applied the first-filed rule, which generally gives priority to an earlier federal case when two cases substantially overlap. It held that the rule applied because the Missouri Action was filed first and both cases concerned the parties’ dispute under the purchase agreement.

The purchase agreement included a clause giving state or federal courts in Jackson County, Missouri, exclusive jurisdiction over disputes connected with the agreement. The court held that BRM had not shown that convenience favored keeping the DRE claims in New York. It also noted that BRM’s claims against DRE were virtually identical to its counterclaims against DRE in the Missouri Action and that resolving them in one forum would be more efficient. The court therefore granted DRE’s motion to dismiss in favor of the Missouri Action.

Disposition

The court granted in part and denied in part the motions to dismiss. It granted All-Ways’s motion to compel arbitration, ordered BRM and All-Ways to arbitrate, and granted DRE’s motion to dismiss in favor of the Missouri Action. It otherwise denied the motions to dismiss, directed the clerk to terminate DRE from the action, and administratively closed the case. The order stated that BRM or All-Ways could move by letter to reopen the case within 30 days after the arbitration concluded.