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Johnson v. Drake

United States District Court, N.D. Texas, Dallas Division

March 30, 2017

STEVEN M. JOHNSON, Petitioner,
v.
WILLIAM DRAKE, Respondent.

          MEMORANDUM OPINION AND ORDER

          Sam A. Lindsay United States District Judge.

         Before the court are Steven M. Johnson's Application for Order Confirming Domestic Arbitration Award (Doc. 1), filed July 7, 2016; Steven M. Johnson's Motion to Confirm Domestic Arbitration Award (Doc. 3), filed August 18, 2016; and Respondent's Motion to Dismiss or, Alternatively, to Transfer Venue (Doc. 8), filed August 18, 2106. Also before the court is the Findings, Conclusions and Recommendation of the United States Magistrate Judge (“Report”) (Doc. 30), recommending that the court grant Respondent's Motion to Dismiss (Doc. 8) and dismiss without prejudice this action for lack of jurisdiction as a result of Petitioner's failure to effect service on Respondent in accordance with 9 U.S.C. § 9; the parties' objections and related briefs to the Report, and Petitioner's request for leave for additional time to effect service of process on Respondent (Doc. 36).

         For the reasons herein explained, the court, after conducting a de novo review of the portions of the Report to which objections was made, accepts the Report as herein modified;[1] overrules Petitioner's and Respondent's objections to the Report; grants Petitioner's request for additional time to effect service of process on Respondent (Doc. 36); denies without prejudice Respondent's Motion to Dismiss (Doc. 8); and denies Respondent's Alternative Motion to Transfer Venue (Doc. 8). To avoid the confusion created by Petitioner's filing of a separate application and motion to confirm the arbitration award, the court denies without prejudice Steven M. Johnson's Application for Order Confirming Domestic Arbitration Award (Doc. 1); denies without prejudice Steven M. Johnson's Motion to Confirm Domestic Arbitration Award (Doc. 3); directs Petitioner to file a single amended application to confirm the arbitration award by April 15, 2017, which must be served on Respondent in accordance with this order.

         I. Factual and Procedural Background

         Petitioner Steven M. Johnson (“Petitioner” or “Johnson”) brought this proceeding on July 7, 2016, to confirm a final arbitration award in the amount of $353, 214.97 that was entered in his favor on July 7, 2016, against Respondent William Drake (“Respondent” or “Drake”). Respondent, who is a resident of Minnesota, was implanted with defective DePuy ASR hip devices in 2007. Respondent retained Petitioner's law firm to represent him in Multi-District Litigation (“MDL”) pending in Ohio. The contingency fee agreement executed between Petitioner and Respondent contains an arbitration clause. Respondent subsequently retained another attorney and terminated Petitioner's representation of him in the MDL. Johnson sued for breach of the parties' contingency fee agreement and obtained an arbitration award in his favor that is the subject of this proceeding and brought pursuant to the FAA.

         On August 18, 2016, Drake moved to dismiss the action “for lack of personal jurisdiction, res judicata, Rule 41, improper venue, and improper service; [a]nd, in the alternative, [moved] to transfer venue.” Resp't's Mot. 8. Petitioner's application to confirm the arbitration award and Respondent's motion to dismiss were referred to the magistrate judge for findings and recommendation. On the same date, a few hours before Respondent filed his motion to dismiss, Petitioner filed a “Motion to Confirm Domestic Arbitration Award” (Doc. 7), although he had previously filed an application to confirm the arbitration award on July 7, 2016. It is not entirely clear whether the motion to confirm filed by Petitioner relies on different or additional grounds for confirming the arbitration award. No explanation was provided by Petitioner for filing the motion to confirm in addition to the application to confirm the arbitration award. Because of the confusion caused by Petitioner filing an application and motion to confirm the arbitration award, only Petitioner's initial application to confirm the arbitration award was referred to the magistrate judge; however, the same reasoning in the Report and this order applies to both such that there is no need for a separate order to address Petitioner's later-filed motion to confirm the arbitration award.

         On February 9, 2017, United States Magistrate Judge Paul D. Stickney entered his Report, recommending that the court grant Respondent's Motion to Dismiss and dismiss without prejudice Petitioner's application and this proceeding for lack of personal jurisdiction over Respondent as a result of Petitioner's failure to comply with section 9 of the FAA, which requires service of process on nonresidents such as Respondent to be performed by “the marshal of any district within which the adverse party may be found.” Petitioner and Respondent both filed objections to the Report on February 23, 2017. On March 9, 2017, Respondent filed a response to Petitioner's objections.

         II. Respondent's Objections

         Respondent objects to the magistrate judge's findings and conclusions that: (1) jurisdiction or venue is proper in this district; and (2) Respondent refused to honor the contingency fee agreement. The court overrules Respondent's objections, as the court concludes that the magistrate judge correctly found that the arbitration award was entered in Dallas, Texas; the parties' arbitration agreement does not specify a court for purposes of confirming any arbitration award entered; and thus, Petitioner was entitled to file his application to confirm the arbitration award in the Northern District of Texas, Dallas Division because section 9 of the FAA specifically provides that, “if no court is specified in the [arbitration] agreement of the parties, then such application [to confirm the arbitration award] may be made to the United States court in and for the district within which such award was made.” Report 5-6 (quoting 9 U.S.C. § 9). Section 9 further provides, “Notice of the application shall be served upon the adverse party, and thereupon the court shall have jurisdiction of such party as though he had appeared generally in the proceeding.” Id. Thus, the court will have jurisdiction over Respondent in this proceeding upon service of Petitioner's application in accordance with 9 U.S.C. § 9, notwithstanding Respondent's arguments to the contrary. Moreover, the court concludes that the defect in Petitioner's attempt at effecting service on Respondent is curable, and the other issues raised by Respondent are irrelevant to whether this court has jurisdiction over Respondent for purposes of confirming the arbitration award under the FAA.

         III. Petitioner's Objections

         In his objections to the Report, Petitioner contends that service of process on Respondent was sufficient and Respondent's defense of insufficient service under Rule 12(b)(5) was waived. Alternatively, Petitioner requests additional time to serve Respondent in accordance with 9 U.S.C. § 9 instead of dismissing the action as proposed by the magistrate judge. For the reasons that follow, the court concludes that the magistrate judge's analysis regarding the applicability of service of process under 9 U.S.C. § 9, as it applies to this case, is correct. Accordingly, Petitioner's objections to the contrary are overruled; however, because the court's determination regarding service of process under 9 U.S.C. § 9 appears to conflict with a prior opinion of the court, the court addresses this issue below, which was raised in Petitioner's objections. Petitioner's objection and argument regarding the applicability of Rule 12(b)(5) and Defendant's waiver of the defense of insufficient service under Rule 12(b)(5) similarly misses the mark and is overruled for the reasons herein explained.

         A. Applicability of the Federal Rules of Civil Procedure

         As noted, Johnson objects to the magistrate judge's “failure to find waiver” of any defense under Rule 12(b) based on insufficient service, to the extent based on failure to effect service in accordance with 9 U.S.C. § 9. Pet'r's Obj. 3. Drake, on the other hand, argues that the magistrate judge did not err in not finding waiver because he “clearly objected to the improper service by [Petitioner]” in his motion to dismiss. Resp't's Resp. 5.

         The likely reason that the magistrate judge did not “find waiver” or address Petitioner's waiver argument is because it was not raised in response to Respondent's motion to dismiss. In briefing the motion to dismiss, both parties conflated the Federal Rules of Civil Procedure that apply to civil actions and pleadings with those that apply to applications to confirm arbitration awards under the FAA. As a result, the arguments presented to the magistrate judge for findings and recommendation were not on point. Despite the magistrate judge's clarification regarding the applicability of the FAA, the parties continue to argue incorrectly in their objections and briefs that the Federal Rules of Civil Procedure apply.

         Under the FAA, applications to confirm or vacate arbitration awards are treated as motions, not a pleading initiating an action under the Federal Rules of Civil Procedure. See 9 U.S.C. § 6 (“Any application to the court hereunder shall be made and heard in the manner provided by law for the making and hearing of motions, except as otherwise herein expressly provided by law for the making and hearing of motions.”); Baylor Health Care Sys. v. Equitable Plan Servs., Inc., 955 F.Supp.2d 678, 688 n.1 (N.D. Tex. 2013). As a result, federal courts in this district and other jurisdictions have distinguished between motions to confirm or vacate arbitration awards and pleadings that initiate federal civil actions and held that the Federal Rules of Civil Procedure that apply to the filing of civil actions and pleadings in federal actions do not apply to motions to confirm or vacate arbitration awards. See, e.g., Productos Mercantiles E Industriales, S.A. v. Faberge USA, Inc., 23 F.3d 41, 46 (2d Cir. 1994) (concluding that Rule 12(b) does not apply to motions to vacate arbitration awards); Health Servs. Mgmt. Corp. v. Hughes, 975 F.2d 1253, 1258 (7th Cir. 1992) (reasoning that notice pleading rules do not apply to a motion to vacate arbitration award; rather, an application under the FAA to vacate an arbitration award is made and heard in the manner provided by law for making and hearing of motions); O.R. Sec., Inc. v. Prof. Planning Assocs., Inc., 857 F.2d 742, 748 (11th Cir. 1988) (concluding that Rule 8's notice pleading rules are inapplicable to proceedings to vacate an arbitration award because relief must be sought in the form of a motion); HCC Aviation Ins. Grp., Inc. v. Employers Reinsurance Corp., No. 3:05-CV-744-BH, 2008 WL 850419, at *4 (N.D. Tex. Mar. 21, 2008) (“Since Petitioners' April 15, 2005 filing [application under the FAA] with the District Court is a motion and not a pleading, it is not subject to the specific pleading requirements of Rule 9(g).”); Garber v. Sir Speedy, Inc., No. 3:96-CV-1089-P, 1996 WL 734947, at *4 (N.D. Tex. Dec. 11, 1996) (“Plaintiffs' complaint to vacate the arbitration award is procedurally improper. The [FAA] requires an application to vacate an award to be [set forth in a motion.]”) (citing 9 U.S.C. 6)).

         As explained by former United States District Judge Jorge A. Solis in Garber, because section 6 of the FAA requires applications to vacate or confirm an arbitration award to be “made and heard in the manner provided by law for the making and hearing of motions, ” an application under this section must comply with Federal Rule of Civil Procedure 7(b), which applies to the filing of motions and other papers and provides that “[a] request for a court order must be made by motion . . . [shall] be in writing . . . state with particularity the grounds for seeking the order; and . . . state the relief sought.” See Id. (citing O.R. Securities, Inc., 857 F.2d at 745). The reason for requiring applications under the FAA to be filed and heard as motions rather than complaints is based on FAA's fundamental policy for expedited judicial review of ...


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