United States District Court, W.D. Kentucky, Bowling Green Division
MEMORANDUM OPINION AND ORDER
JOSEPH H. McKINLEY, Jr., District Judge.
Defendant, Treviicos-Soletanche J.V., moves to dismiss Plaintiff Weddle Enterprises, Inc.'s complaint pursuant to Fed.R.Civ.P. 12(b)(6) and/or to compel arbitration. [DN 7]. Fully briefed, this matter is ripe for decision.
This matter arises out of a construction project for the repair of the Wolf Creek Dam located on the Cumberland River in Jamestown, Kentucky. The Dam is owned and operated by the United States Army Corps of Engineers and serves to protect downstream communities in Kentucky and Tennessee, generate hydroelectric power, and maintain the navigability of the Cumberland River.
Over the years, the Dam had been experiencing seepage issues. As a precaution, the Corps lowered the water level of the Cumberland Lake to reduce hydrostatic pressure on the Dam. The Corps ultimately determined that the Dam required repair. The Project was publicly bid, and the successful bidder was Defendant, Treviicos-Soletanche J.V., a joint venture consisting of Treviicos South, Inc., a Delaware corporation with its principal place of business in Boston, Massachusetts, and Soletanche Construction, Inc., a Pennsylvania corporation with its principal place of business in Cuddy, Pennsylvania. Under Defendant's contract with the Corps, Treviicos South's Boston, Massachusetts address was designated as the legal location of the entity contracting with the Corps. Likewise, this address is the address for the Defendant's home office, as well as for tax, insurance, and other purposes. The initial value of the contract awarded by the Corps to Defendant was over $341 million dollars. The Defendant contracted approximately $106 million of the work to subcontractors from various states.
Defendant entered into a subcontract with Plaintiff, Weddle Enterprises, Inc., whereby Plaintiff would perform certain earth work and civil operations, including excavation and grading operations, transportation of excavated material to the on-site disposal area, and building of access roads. Article 28 of the Subcontract provided for a dispute resolution process:
As for disputes not involving the acts, omissions or otherwise the responsibility of the Owner under the Prime Contract, promptly upon notification by the either party of a dispute, the Contractor and Subcontractor shall meet to amicably resolve such dispute. In the event that no resolution is achieved, the parties, prior to the initiation of any action or proceeding under this Article, shall make a good faith effort to resolve the dispute by negotiation between representatives with decision-making power. To facilitate the negotiation, the parties agree to follow the procedure and rules for mediation provided by the American Arbitration Association.
In the event a dispute cannot be resolved as set forth above, the matter shall thereafter proceed to, and be settled by arbitration administered by the American Arbitration Association under its Construction Industry Arbitration Rules and to be held in Boston, Massachusetts. The award rendered by the arbitrator(s) shall be final and judgment may be entered on it in accordance with applicable law in any court having jurisdiction.
(Arbitration Agreement at 15.)
Plaintiff brought suit in the Russell Circuit Court asserting that the Defendant breached the subcontract by denying Plaintiff the chance to correct allegedly nonconforming work before the Defendant wrongfully and unilaterally deducted the sum of $289, 200.64 from Plaintiff's subcontract amount. On May 14, 2014, Defendant removed the action to federal court based on diversity of citizenship, 28 U.S.C. § 1332(a). On May 19, 2014, Defendant moved to dismiss the complaint pursuant to Fed.R.Civ.P. 12(b)(6) and Federal Arbitration Act, 9 U.S.C. § 1, and to compel the parties to arbitrate the claims raised in the complaint in accordance with the terms of the written arbitration agreement between the parties.
II. STANDARD OF REVIEW
A motion to dismiss based on the existence of a valid arbitration agreement is not evaluated under the usual Fed.R.Civ.P. 12(b)(6) standard. Treved Exteriors, Inc. v. Lakeview Const., Inc., 2014 WL 1047117, *3 (E.D. Ky. March 18, 2014). Instead, courts apply the standard applicable to motions for summary judgment. Id . "To survive such a motion, the nonmoving party must demonstrate that the validity of the agreement is in issue' by showing that there is a genuine issue of material fact as to the validity of the arbitration agreement." Id . (quoting Great Earth Co., Inc. v. Simons , 288 F.3d 878, 888-89 (6th Cir. 2002)). "If the non-moving party satisfies this burden, the court must allow the case to proceed to trial." Id . "If the non-moving party fails to make the required showing, the court should compel arbitration." Id.
Defendant moves to dismiss the action and compel arbitration of Plaintiff's breach of contract claim. Plaintiff argues that the Court should not enforce the arbitration agreement pursuant to the requirements of the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1. Plaintiff contends that the arbitration agreement in this case is not governed by the FAA because it does not evidence a transaction involving interstate commerce. Further, Plaintiff contends that even if the arbitration clause is enforceable, the ...