84 Lumber Company v. F.H. Paschen, S.N. Nielsen & Associates, LLC et al, No. 2:2012cv01748 - Document 151 (E.D. La. 2016)
Court Description: ORDER AND REASONS - the Court GRANTS 84 Lumber's and Maggie's Management's motion 134 to re-open this case and to dismiss J & A's claims against them. The Court ORDERS that J & A's claims against 84 Lumber and Maggie's Management are DISMISSED WITH PREJUDICE for failure to prosecute. The Court further ORDERS that the stay imposed by the Court's July 24, 2013 order is hereby lifted. The Court further ORDERS that a status conference will be held on Thursday, Ju ne 9, 2016, at 2:00 p.m. in the Chambers of United States District Judge Sarah S. Vance, 500 Poydras Street, C-25 in New Orleans, Louisiana. Counsel for all parties are instructed to attend in person. Status Conference set for 6/9/2016 02:00 PM before Judge Sarah S. Vance.. Signed by Judge Sarah S. Vance on 5/5/16.(jjs)
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84 Lumber Company v. F.H. Paschen, S.N. Nielsen & Associates, LLC et al Doc. 151 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF LOUISIANA 84 LUMBER COMPANY CIVIL ACTION VERSUS NO: 12-1748 F.H. PASCHEN, S.N. NIELSEN & ASSOCIATES, LLC, ET AL. SECTION: R ORD ER AN D REASON S Before the Court is a m otion filed by 84 Lum ber Com pany and Maggie's Managem ent, LLC to lift the ongoing stay in this case and to dism iss J & A Construction Managem ent Resources Com pany's claim s against them for failure to prosecute. For the following reasons, the Court grants the m otion. I. IN TROD U CTION This case arises out of two school construction projects in New Orleans, Louisiana.1 84 Lumber Com pany was a subcontractor to J & A Construction Managem ent Resources Com pany, Inc. J & A, in turn, was a subcontractor to the projects' general contractor, F.H. Paschen S.N. Nielsen & Associates, LLC 1 Unless otherwise noted, the Court draws these facts from its J uly 24, 20 13 order com pelling arbitration. R. Doc. 70 . Dockets.Justia.com ("Paschen"). Continental Casualty Com pany, Safeco Insurance Com pany of Am erica, and Fidelity and Deposit Com pany of Maryland were surety com panies that backed the projects. On J uly 5, 20 12, 84 Lum ber sued Paschen and the surety com panies, alleging that it was not paid in full for work perform ed under its Master Service Agreem ent with J & A. It also alleged that it was entitled to paym ent for m aterials and for additional work perform ed outside of the Master Service Agreem ent. Paschen answered 84 Lum ber's com plaint and added J & A as a third-party defendant. J & A filed an answer asserting a cross-claim against Paschen and counterclaim s against 84 Lum ber for breach of contract, interference with a contractual relationship, fraudulent m isrepresentation, conversion, and unjust enrichm ent. J & A also added Maggie's Managem ent, LLC, an affiliate bonding agent of 84 Lum ber, as a third-party defendant in the fraudulent misrepresentation, conversion, and unjust enrichment claims. This case was allotted to J udge Helen Berrigan in Section C of this Court. After J & A filed its answer, 84 Lum ber and Maggie's Managem ent each m oved to stay proceedings and com pel arbitration of J & A's claim s against them under an arbitration provision in the Master Service Agreem ent.2 In its 2 R. Doc. 44. Although Maggie's Managem ent was not a party to the Master Service Agreem ent, it successfully argued that it was entitled to enforce the arbitration provision against J & A because J & A's claim s against it rely on the term s of the Master 2 opposition m em oranda, J & A argued that 84 Lum ber fraudulently induced J & A to enter the Master Service Agreem ent and that the arbitration provision within that Agreem ent was therefore invalid.3 J & A also argued that the interests of fairness and judicial econom y counseled against arbitration.4 On J uly 24, 20 13, J udge Berrigan granted both m otions. Applying the Fifth Circuit's two-step test for com pelling arbitration,5 J udge Berrigan first found that the Master Service Agreem ent's arbitration provision was a binding agreem ent to arbitrate. As to J & A's argum ent that fraud vitiated J & A's consent to this arrangem ent, J udge Berrigan found that because the alleged fraud related to the Master Agreem ent as a whole, as opposed to the agreem ent to arbitrate, arbitration was the appropriate forum for resolving J & A's claim .6 Turning to the second step, J udge Berrigan found no legal constraints external to the parties' arbitration agreem ent that foreclosed Service Agreem ent and stem from allegations of interdependent and concerted m isconduct by Maggie's Managem ent and 84 Lum ber. R. Doc. 39-1 at 4. 3 R. Doc. 62 at 5-8; R. Doc. 63 at 5. 4 R. Doc. 62 at 8. 5 As the Fifth Circuit holds, "a two-step inquiry governs whether parties should be com pelled to arbitrate a dispute: First, the court m ust determ ine whether the parties agreed to arbitrate the dispute. Once the court finds that the parties agreed to arbitrate, it m ust consider whether any federal statute or policy renders the claim s nonarbitrable." BancOne Acceptance Corp. v. Hill, 367 F.3d 426, 429 (5th Cir. 20 0 4) (internal citations om itted). 6 R. Doc. 70 at 6-7. 3 arbitration.7 Thus, J udge Berrigan stayed all proceedings pending arbitration of J & A's claim s against 84 Lum ber and Maggie's Managem ent.8 On Septem ber 13, 20 13, 84 Lum ber m oved to re-open the case with respect to all non-arbitrable claim s.9 84 Lum ber noted that J & A had not yet initiated arbitration proceedings and argued that continuing to stay the case pending arbitration would prejudice 84 Lum ber by preventing it from litigating its claim s against other parties. In opposition, J & A argued, am ong other things, that tim e was not of the essence and that J & A would proceed with arbitration "at the tim e it sees fit."10 J udge Berrigan denied 84 Lum ber's m otion but noted that 84 Lum ber was free to request an order com pelling arbitration within a certain tim e period.11 Later, 84 Lum ber m oved the Court to set an arbitration deadline, which J & A opposed.12 J udge Berrigan granted the m otion and ordered J & A to initiate arbitration by May 30 , 20 14.13 Three days before the deadline, J & A 7 Id. at 8-9. 8 Id. at 11. 9 R. Doc. 72. 10 R. Doc. 85 at 4. 11 R. Doc. 86 at 4. 12 R. Docs. 87, 88. 13 R. Doc. 10 1. 4 m oved for an extension.14 J udge Berrigan granted the m otion and extended the deadline to J uly 24, 20 14.15 Nonetheless, J & A failed to initiate arbitration within the designated tim e period. According to J & A, the com pany subm itted an arbitration dem and to the Am erican Arbitration Association ("AAA") on J uly 23, 20 14, one day before the m odified deadline.16 Rather than subm itting the standard filing fee, J & A applied for a fee reduction or deferral from the AAA.17 The AAA denied the application and notified J & A that its arbitration dem and was deficient.18 J & A failed to cure the deficiency by subm itting a filing fee, and the AAA closed its arbitration file in October 20 14.19 84 Lum ber asserts that it is not aware of additional attem pts by J & A to initiate arbitration,20 and J & A has not described any such efforts. On Septem ber 11, 20 15, J udge Berrigan ordered J & A to show cause why it should not be held in contem pt for failure to com ply with the Court's 14 R. Docs. 10 5. 15 R. Doc. 111. 16 R. Doc. 139-1 at 7. 17 Id.; see also R. Doc. 139-7 at 1 (J & A's "Am erican Arbitration Association Affidavit in Support of Reduction or Deferral of Filing and Adm inistrative Fees"). 18 Id. 19 Id. 20 R. Doc. 134-1 at 3. 5 arbitration orders.21 Although J & A filed a response--arguing, am ong other things, that the arbitration agreem ent is "unreasonably favorable" to 84 Lum ber and that arbitration is prohibitively expensive--it still has yet to initiate arbitration proceedings.22 Thus, nearly three years after J udge Berrigan's initial order, this case rem ains stayed and adm inistratively closed. On J anuary 6, 20 16, this case was reassigned to this Court for all further proceedings.23 84 Lum ber and Maggie's Managem ent now m ove the Court to re-open the case and to dism iss 84 Lum ber's claim s against them for failure to prosecute.24 J & A opposes the m otion. II. LEGAL STAN D ARD Federal Rule of Civil Procedure 41(b) em powers a district court to involuntarily dism iss an action, with prejudice, if a plaintiff "fails to prosecute or to com ply with [the Federal Rules of Civil Procedure] or a court order." Fed. R. Civ. P. 41(b). Because "dism issal with prejudice is an extrem e sanction that deprives the litigant of the opportunity to pursue his claim ," however, a 21 R. Doc. 140 . 22 R. Doc. 141. 23 R. Doc. 144. 24 R. Doc. 134. 6 dism issal under Rule 41(b) should be granted only when: "(1) there is a clear record of delay or contum acious conduct by the plaintiff, and (2) the district court has expressly determ ined that lesser sanctions would not prom pt diligent prosecution, or the record shows that the district court em ployed lesser sanctions that proved to be futile." Berry v. Cigna/ RSI– Cigna, 975 F.2d 118 8 , 1191 (5th Cir. 1992) (quoting Callip v. Harris County Child W elfare Dept., 757 F.2d 1513, 1521 (5th Cir. 1985)). In addition, to dism iss an action for failure to prosecute, the Fifth Circuit requires the presence of at least one of three aggravating factors: "(1) delay caused by [the] plaintiff him self and not his attorney; (2) actual prejudice to the defendant; or (3) delay caused by intentional conduct." Berry , 975 F.2d at 1191 III. D ISCU SSION The Court finds that there is a clear record of delay and contum acious conduct intentionally caused by J & A and that lesser sanctions would not prom pt diligent prosecution. J & A has had nearly three years to com ply with J udge Berrigan's order requiring J & A to subm it its claim s against 84 Lum ber and Maggie's Managem ent to arbitration. Despite J & A's defiant assertion 7 that it would proceed "at the tim e it sees fit,"25 J udge Berrigan gave J & A num erous opportunities to file its arbitration dem and. When J & A inform ed the Court with just three days notice that it would be unable to initiate arbitration by the Court's May 30 , 20 14 deadline, J udge Berrigan extended the deadline by two m onths. Even with the additional tim e, however, J & A's efforts proved inadequate. Although J & A finally sent an arbitration dem and to the AAA on J uly 24, 20 14--a full year after the initial order com pelling arbitration--J & A failed to pay the required filing fee or obtain a fee waiver or deferral under the applicable arbitral rules. To date, J & A has neither cured this filing deficiency nor m ade any additional attem pts to arbitrate its claim s against 84 Lum ber and Maggie's Managem ent--this despite J udge Berrigan's Septem ber 20 15 order requiring J & A to show cause why it should not be held in contem pt for failure to com ply with the Court's arbitration orders. In addition, the Court finds that J & A's dilatory conduct has prejudiced other parties to this litigation. As noted, this case arises out of two construction projects and involves a num ber of contractors and surety com panies. For nearly three years, 84 Lum ber and all other parties have been precluded from litigating their claim s and defenses because this case has been 25 R. Doc. 85 at 4. 8 stayed pending arbitration procedings that J & A never initiated. As tim e passes, m em ories fade, evidence becom es harder to locate, and the litigation process becom es m ore difficult for all parties involved. See Gonino v. UNICARE Life & Health Ins. Co., No. CIV.A. 30 2CV250 1G, 20 0 5 WL 60 8158, at *3 (N.D. Tex. Mar. 16, 20 0 5) ("[E]ach passing day increases UNICARE's difficulty in m ounting an adequate defense, as witnesses become more difficult to locate and those who can be located lack sufficient m em ory to provide meaningful testimony."). Under these circumstances, dismissal with prejudice is an appropriate disposition of J & A's claim s against 84 Lum ber and Maggie's Managem ent. See Renobato v. Com pass Bank Corp., 480 F. App'x 764 (5th Cir. 20 12) (affirm ing dism issal with prejudice when plaintiff did not initiate arbitration proceedings for three years, even after being given a second chance to do so by the district court); also Salt Lick Bancorp v. F.D.I.C., 187 F. App'x 428, 447 (6th Cir. 20 0 6) (dism issal was not abuse of discretion when plaintiff did not initiate arbitration for over two years, despite plaintiff's difficulty retaining counsel and obtaining docum ents from a third party); W indw ard Agency , Inc. v. Cologne Life Reinsurance Co., 123 F. App'x 481, 483 (3d Cir. 20 0 5) (affirm ing dism issal when plaintiff failed to initiate arbitration for several years and observing that "a stay of proceedings pending arbitration 9 contem plates continuing supervision by a court to ensure that arbitration proceedings are conducted within a reasonable am ount of tim e"). J & A gives two argum ents against this conclusion, both of which are untim ely and procedurally im proper attem pts to relitigate issues that have already been decided. First, J & A argues that the arbitration agreem ent is a contract of adhesion and is therefore unenforceable. Second, J & A argues that it cannot be com pelled to arbitrate because it is unable to afford the anticipated costs of arbitration. Both argum ents challenge J udge Berrigan's J uly 24, 20 13 order finding that (1) the parties intended to arbitrate J & A's claim s and (2) no federal statute or policy renders J & A's claim s nonarbitrable. See BancOne Acceptance Corp. v. Hill, 367 F. 3d 426, 429 (5th Cir. 20 0 4 (describing the two-step test for determ ining whether a party should be com pelled to arbitrate a dispute). But J & A did not raise either argum ent in its original opposition to the m otions to com pel arbitration or in its opposition to 84 Lum ber's m otion to establish an arbitration deadline. Moreover, in the nearly three years since J udge Berrigan ruled that the law requires J & A to subm it its claim s to arbitration, J & A has neither m oved for reconsideration, nor asked the Court to certify its ruling for interlocutory appeal under 28 U.S.C. § 1292(b). 10 Further, the Court finds that J & A has not provided a convincing explanation for its failure to raise its present challenges in a tim ely m anner and through an appropriate m otion. Although J & A's written response to J udge Berrigan's show cause order describes disagreem ents between J & A and its form er attorney of record, as well as J & A's difficulty securing arbitration counsel,26 J & A has had representation at every stage of this litigation. That J & A nonetheless failed to raise the issues of adhesion and arbitration costs until it was presented with a show cause order and a m otion to dism iss for failure to prosecute dem onstrates that the Court should not re-open J udge Berrigan's arbitrability ruling at this late stage. See Jam es v. McDonald's Corp., 417 F.3d 672, 681 (7th Cir. 20 0 5) (finding that once the district court concluded that the law required arbitration, "it was incumbent upon [plaintiff] to abide by the district court's ruling"; "[h]er failure to pursue prom ptly the court's reconsideration, or this court's review on interlocutory appeal, shows that the district court did not clearly abuse its discretion in dism issing [plaintiff's] case with prejudice"). J & A's claim s against 84 Lum ber and Maggie's Managem ent are therefore dism issed with prejudice. 26 R. Doc. 141 at 1-11. 11 IV. CON CLU SION For the foregoing reasons, the Court GRANTS 84 Lumber's and Maggie's Managem ent's m otion to re-open this case and to dism iss J & A's claim s against them . The Court ORDERS that J & A's claim s against 84 Lum ber and Maggie's Managem ent are DISMISSED WITH PREJ UDICE for failure to prosecute. The Court further ORDERS that the stay im posed by the Court's J uly 24, 20 13 order is hereby lifted. The Court further ORDERS that a status conference will be held on Th u rs d ay, Ju n e 9 , 2 0 16 , at 2 :0 0 p .m . in the Cham bers of United States District J udge Sarah S. Vance, 50 0 Poydras Street, C-25 in New Orleans, Louisiana. Counsel for all parties are instructed to attend in person. New Orleans, Louisiana, this _ _5th _ day of May, 20 16. __ _____________________________ SARAH S. VANCE UNITED STATES DISTRICT J UDGE 12
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