Cargill Meat Solutions Corporation v. Freezer Refrigerated Storage Inc., No. 3:2012cv00725 - Document 29 (S.D. Ill. 2012)
Court Description: ORDER denying 9 Motion to Compel Arbitration: For the reasons delineated in the attached Memorandum and Order, the Court DENIES in its entirety Defendant's motion to compel arbitration (Doc. 9). Signed by Judge Michael J. Reagan on 11/19/12. (soh )
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Cargill Meat Solutions Corporation v. Freezer Refrigerated Storage Inc. Doc. 29 I N THE UNI TED STATES DI STRI CT COURT FOR THE SOUTHERN DI STRI CT OF I LLI NOI S CARGI LL MEAT SOLUTI ONS CORPORATI ON, Plaint iff, v. FREEZER REFRI GERATED STORAGE, I NC., d/ b/ a POLARVI LLE REFRI GERATED WAREHOUSE, Defendant . ) ) ) ) ) ) ) ) ) ) ) ) Case No. 12- cv- 0725- MJR M EM ORAN D UM AN D ORD ER REAGAN, Dist r ict Judge: A. I nt r oduct ion a nd Pr oce dur a l Ove r vie w I n t his breach of cont ract act ion, Car gill Meat Solut ions Corporat ion ( CMS) sues a warehouse owner and operat or - - Freezer Refrigerat ed St orage I ncorporat ed, doing business as Polarville Refrigerat ed Warehouse ( Polarville) . The Court enj oys subj ect m at t er j urisdict ion via t he federal diversit y st at ut e, 28 U.S.C. 1332. CMS claim s t hat Polarville breached t he t erm s of a cont ract bet ween t he part ies ( a Warehousing Agreem ent dat ed Oct ober 21, 2010) 1 , dam aging CMS’s product s. More specifically, CMS alleges t hat Polar ville breached t he Warehousing Agreem ent by failing t o keep it s warehouse in good repair and 1 A copy of t he Warehousing Agreem ent is at t ached t o t he com plaint ( Doc. 2- 1) . Page | 1 Dockets.Justia.com t hat a freezer failure result ed in t he large- scale spoilage of food product s which CMS st ored wit h Polarville. The com plaint furt her alleges t hat Polarville failed t o m aint ain insurance policies wit h specified lim it s ( adequat e t o cover risks of loss like t hat which occurred) and refused t o indem nify CMS for it s loss, cost ing CMS over $519,000 in dam ages, exclusive of at t orneys’ fees, int erest , and cost s. I n response t o t he com plaint , Polarville m oved t o com pel CMS t o arbit rat e t his claim pursuant t o a cold st orage warehouse agreem ent dat ed August 3, 2011 ( Cold St orage Agreem ent , Doc. 9) . Polarville seeks arbit rat ion under eit her t he I llinois Uniform Arbit rat ion Act , 710 I LCS 5/ 1, et seq., or t he Federal Arbit rat ion Act , 9 U.S.C §§ 1- 16 ( see Doc. 10, p. 3) . B. Ana lysis Polarville owns and operat es a freezer warehouse locat ed in Nat ional Cit y, I llinois ( w it hin t his Judicial Dist rict ) . On Oct ober 21, 2010, Wichit a Kansas- based CMS ent ered int o t he Warehousing Agreem ent wit h Polarville, agreeing t hat Polarville would st ore CMS’s frozen food product s at Polarv ille’s Nat ional Cit y warehouse. Under t he Warehousing Agreem ent , Polarville agreed t o “ keep t he warehouse in good order and repair and in such condit ion t hat all Product handled ( under t he agreem ent ) shall rem ain, if frozen, at an air and product t em perat ure of 0 degrees Fahrenheit or below” ( Doc. 2- 1, § 3.1) . The Warehousing Agr eem ent did not cont ain an arbit rat ion provision. Page | 2 CMS alleges t hat on or before May 30, 2011, Polarville experienced a freezer failure, and CMS’s product s st ored pursuant t o t he Warehousing Agreem ent were dest royed. CMS filed t his lawsuit on June 20, 2012, aft er form ally subm it t ing a claim t o Polarville, which Polarville refused t o pay. Polarville m oves t his Court for an order com pelling arbit rat ion and dism issing t his breach of cont ract claim or, alt ernat ively, st aying t hese proceedings pending arbit rat ion. I n support of it s m ot ion, Polarville cit es t he Cold St orage Agreem ent , dat ed August 3, 2011 ( Doc. 9, Exh. 1) . Significant ly, t he Cold St orage Agreem ent is a cont ract bet ween Polarville and CMS’s parent com pany - - Cargill, I nc. ( “ Cargill” ) . CMS is not a part y t o t he Cold St orage Agreem ent . However, Polarville argues t hat t he Cold St orage Agreem ent ent ered int o by Cargill and Polarville is enforceable against CMS by v irt ue of t he CMS- Cargill relat ionship. Polarville also cont ends t hat t he Cold St orage Agreem ent supersedes t he Warehousing Agreem ent , binding CMS t o it s t erm s, including t he arbit rat ion clause. Polarville not es t hat t he Federal Arbit rat ion Act and t he sim ilar I llinois st at ut e “ require a court t o com pel arbit rat ion w here … a cont ract provides for it ” ( Doc. 10, p. 3) . I ndeed, t he Federal Arbit rat ion Act “ em bodies t he nat ional policy favoring arbit rat ion and places arbit rat ion agreem ent s on equal foot ing wit h all ot her cont ract s.” Buck e ye Che ck Ca shing, I nc. v. Ca r de gna , 5 4 6 U.S. 4 4 0 , 4 4 3 ( 2 0 0 6 ) . St at ed anot her way, t he Federal Arbit rat ion Act “ st r ongly favors arbit rat ion when t he part ies have agreed t o Page | 3 it .” Fa ulk e nbe r g v. CB Ta x Fr a nchise Syst e m s, LP, 6 3 7 F.3 d 8 0 1 , 8 0 4 ( 7 t h Cir . 2 0 1 1 ) . “ To com pel arbit rat ion, a part y need only show: ( 1) an agreem ent t o arbit rat e, ( 2) a disput e wit hin t he scope of t he arbit rat ion agreem ent , and ( 3) a refusal by t he opposing part y t o proceed t o arbit rat ion.” Zur ich Am e r ica n I ns. Co. v. W a t t s I ndust r ie s, I nc. 4 6 6 F.3 d 5 7 7 , 5 8 0 ( 7 t h Cir . 2 0 0 6 ) , cit ing Zur ich Am . I ns. Co. v. W a t t s I ndus., I nc., 4 1 7 F.3 d 6 8 2 , 6 9 0 ( 7 t h Cir . 2 0 0 5 ) , a nd Kie fe r Spe cia lt y Floor ing, I nc. v. Ta r k e t t , I nc., 1 7 4 F.3 d 9 0 7 , 9 0 9 ( 7 t h Cir . 1 9 9 9 ) . Thus, t o com pel CMS t o arbit rat e, Polar ville m ust first show t hat CMS is bound by an enforceable arbit rat ion agreem ent . The Unit ed St at es Court of Appeals for t he Sevent h Circuit has held t hat whet her or not a com pany is bound t o arbit rat e, “ as well as what issues it m ust arbit rat e, is a m at t er t o be det erm ined by t he Court on t he basis of t he cont ract ent ered int o by t he part ies.” Zur ich, 4 1 7 F.3 d a t 6 9 1 , cit ing AT & T Te ch., I nc. v. Com m unica t ions W or k e r s of Am ., 4 7 5 U.S. 6 4 3 , 6 4 9 ( 1 9 8 6 ) . Lacking an arbit rat ion agreem ent in t he Warehousing Agreem ent ent ered wit h CMS, Polarville argues t hat Cargill cont rolled t he act ivit ies of CMS such t hat Cargill and CMS m ay be t reat ed as a single ent it y, t hereby binding CMS t o t he arbit rat ion provision in t he Cold St orage Agreem ent execut ed by Cargill. The Court rej ect s t his argum ent . Page | 4 First , alt hough Polarville alleges t hat Cargill cont rolled CMS, it offers no support for t his conclusory allegat ion. Second, “ a m ere parent - subsidiary relat ionship ‘does not creat e t he relat ion of principal and agent or alt er ego bet ween t he t wo.’” Zur ich, 4 1 7 F.3 d a t 6 8 8 , quot ing Ca ligiur i v. Fir st Colony Life I ns. Co., 7 4 2 N .E.2 d 7 5 0 , 7 5 6 ( I ll. App. 2 0 0 0 ) . Se e a lso Thom son– CSF, S.A. v Am . Ar bit r a t ion Ass’n, 6 4 F.3 d 7 7 3 , 7 7 7 ( 2 d Cir . 1 9 9 5 ) ( a cor por a t e r e la t ionship ge ne r a lly is not e nough t o bind a nonsigna t or y t o a n a r bit r a t ion a gr e e m e nt ) . Thus, CMS’s relat ionship wit h Cargill alone does not bind CMS t o Cargill’s cont ract ual agreem ent s. Furt herm ore, alt hough Polarville correct ly recognizes t hat t here are five doct rines by which a nonsignat ory m ay be bound by an arbit rat ion agreem ent ent ered int o by ot hers, Polarville fails t o sufficient ly art iculat e how and which of t he five doct rines binds CMS t o arbit rat e t he claim s at issue herein. Se e Zur ich, 4 1 7 F.3 d a t 6 8 7 , cit ing Fyr ne t ics ( H .K.) Lt d. v. Qua nt um Gr oup, I nc., 2 9 3 F.3 d 1 0 2 3 , 1 0 2 9 ( 7 t h Cir . 2 0 0 2 ) ( de lin e a t ing five doct r ine s t hr ough w hich nonsigna t or y ca n be bound t o a n a r bit r a t ion a gr e e m e nt e nt e r e d int o by ot he r s: ( 1 ) a ssum pt ion; ( 2 ) a ge ncy; ( 3 ) e st oppe l; ( 4 ) ve il pie r cing; a nd ( 5 ) incor por a t ion by r e fe r e nce .) . So, Polarville has not dem onst rat ed t he exist ence of an agreem ent t o arbit rat e execut ed by CMS. Nor does t he record support t he proposit ion t hat t he disput e bet ween t he part ies in t he case at bar falls w it hin t he scope of Page | 5 t he arbit rat ion provision sought t o be enforced ( cont ained wit hin t he Cold St orage Agreem ent ) . The briefs indicat e t hat t he Cold St orage Agreem ent relat ed t o Cargill product st ored at a Polarville warehouse in Valm eyer, I llinois, not t he Nat ional Cit y warehouse t hat experienced t he freezer failure. Moreover, Polarville and Cargill ent ered int o t he Cold St orage Agreem ent in August 2011 - - nearly t hree m ont hs aft er Polarville’s freezer failed on May 30, 2011. So in it s m ot ion t o com pel arbit rat ion, Polarv ille asks t his Court t o enforce a cont ract t hat did not exist at t he t im e of t he alleged breach which is t he subj ect of t his suit . Sim ply put , t he Warehousing Agreem ent execut ed by CMS and Polarville has no ar bit rat ion provision, and Polarville has not shown any basis by which CMS can be bound by t he arbit rat ion provision cont ained in t he Cold St orage Agreem ent execut ed by Cargill. As CMS properly point s out in it s m em orandum ( Doc. 15, p. 5) , Polarville has st ressed t hat arbit rat ion is favored and doubt s should be resolved in favor of arbit r at ion, but “ t hese point s are irrelevant when t here is no cont ract bet ween t he part ies t hat provides for arbit rat ion.” C. Conclusion For all t hese reasons, t he Court D EN I ES in it s e nt ir e t y Defendant Polarville’s m ot ion t o com pel arbit r at ion ( Doc. 9) . A Scheduling and Discovery Order has been ent ered herein, a t rial dat e has been assigned, Page | 6 and t he case has been set for set t lem ent conference before t he Honorable St ephen C. William s, Unit ed St at es Magist rat e Judge, on January 9, 2013. I T I S SO ORDERED. DATED Novem ber 19, 2012 s/ Michael J. Reagan MI CHAEL J. REAGAN Unit ed St at es Dist r ict Judge Page | 7
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