Tenth Circuit: Holds that in Domestic Arbitrations, It May Only be Compelled Within (Web)

Hamid Ansari v. Qwest Communications Corp., (Tenth Circuit, July 12, 2005).  The United States Court of Appeals for the Tenth Circuit ruled that under §4 of the Federal Arbitration Act (FAA), 9 U.S.C. §§ 1-16, when two parties contract to arbitrate in a specific jurisdiction, only the district court from that specific jurisdiction may compel arbitration.
 
Plaintiff, Ansari, and the defendant, Quest entered into several contracts with each other for long-distance telecommunications services.  In these contracts, an arbitration provision stated:
 
Any dispute or disagreement arising between Qwest and Customer in connection with this Agreement which is not settled to the mutual satisfaction of Qwest and customer within thirty (30) days from the date either party informs the other in writing that such dispute or disagreement exists, shall be settled by arbitration in Washington, D.C. in accordance with the Commercial Arbitration Rules of the American Arbitration Association in effect on the date that such notice is given.
 
Although the arbitration provision was in place, Ansari filed suit in Colorado federal court against Qwest for fraud in the inducements, breach of covenant and warranty, rescission, unjust enrichment, as well as several other claims.  Qwest petitioned the Colorado district court to compel arbitration.  The district court denied the petition, stating it had no authority to compel arbitration in Colorado because the parties agreed to arbitrate in Washington, D.C. and they also had no authority to compel arbitration in Washington, D.C.  Qwest appealed. 
 
The lone issue in this case was “whether §4 of the Federal Arbitration Act (FAA), 9 U.S.C. §§ 1-16, prohibited the Colorado district court from compelling arbitration in Colorado when the parties’ contractual agreement designated Washington, D.C as the arbitration forum. 
 
The court recognizes three possible interpretations of §4 of the FAA.  The first, which is that eventually adopted by the Tenth Circuit, has also been adopted by the 3rd, 6th, 7th, and the District of Columbia Curcuits.  This approach states, “a district court lacks authority to compel arbitration in other districts, or in its own district if another has been specified for arbitration.” Merrill Lynch, 49 F.3d 323, 327 (7th Cir.1995). 
 
A second approach, argued by Quest but rejected by this court, is also favored by the 9th Circuit.  It states that a district court is permitted to “compel arbitration in its own district and ignore the forum specified in the arbitration clause.” Textile Unlimited, Inc. v. A..BMH & Co., 240 F.3d 781, 783 (9th Cir. 2001). 
 
In making its decision, the 9th Circuit relied on Cortez Byrd Chips, Inc. v. Bill Harbert Construction Co., 529 U.S. 193, 195 (2000), stating that §§9-11 of the FAA were discretionary and courts could “allow a motion to confirm, vacate, or modify an arbitration award to be brought in any district court where venue is proper.” 
 
The 9th Circuit applied this reasoning to the entire statute when concluding that arbitral forum preferences may be modified.  This court points out that the 9th Circuit overlooks the difference language between §4 and §§9-11.  §4 uses the word “shall” whereas §§9-11 use “may.”  
 
A third view, rejected by this court, but held by the 5th Circuit states that “a district court may compel arbitration in the district specified in the arbitration agreement, even though that district is outside its own district.” Dupuy-Busching Gen. Agency, Inc. v. Ambassador Ins. Co., 524 F.2d 1275 (5th Cir1975).  This court found no statutory support for this approach.
 
Although, not addressed by the 10th Circuit, another approach taken by some courts has been to transfer venue to the district court embracing the arbitration site.  M.C. Construction Corp. v. Gray Co., 17 F.Supp.2d 541 (W.D. Va. 1998). (transferring the case to the Eastern District of Kentucky, Lexington Division for further proceedings because the court lacked jurisdiction to compel arbitration). 
 
Find this opinion at: http://pacer.ca10.uscourts.gov/opinions/main.hph