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Dealer Computer Services, Inc., F/K/A Ford Dealer Computer Services, Inc v. Monarch Ford and Phd

January 25, 2013


The opinion of the court was delivered by: Lawrence J. O'Neill United States District Judge



This case concerns contractual dispute between Plaintiff Dealer Computer Services, Inc. ("DCS") and Defendant Monarch Ford ("Monarch"), a wholly owned subsidiary of Defendant PHD, Inc., over the provision to Monarch of DCS's proprietary "Dealer Management System," a computer hardware and software package designed to manage the day-to-day operations of an automobile dealership, pursuant to a September 3, 1993 contract (the "Agreement"). Plaintiff alleges Monarch breached and/or repudiated the Agreement. Doc. 1. It is undisputed, however, that the Agreement contains an arbitration clause and that, in 2010, pursuant to that clause, DCS filed a demand for arbitration. It is also undisputed that the arbitration is currently pending in Houston, Texas.

On November 30, 2012, Plaintiff filed a Complaint in this Court, alleging a cause of action for breach of contract and requesting the provisional remedy of attachment. Doc. 1. Simultaneously, Plaintiff filed an "Ex Parte Application for Provisional Remedy," requesting issuance of a provisional writ of attachment without notice because Monarch had recently published a bulk sales notice informing the public that it intended to sell off all of its assets by December 5, 2012. Doc. 2. Also that same day, Plaintiff filed a document entitled "Application to Stay Proceedings Pending Arbitration," requesting a stay of "all proceedings in this action, other than its Application for Preliminary Injunctive Relief and Temporary Restraining order and Application for ex parte provisional Relief pending the completion of the parties' arbitration." Doc. 3. Plaintiff failed to pay the required filing fee until December 3, 2012, at which time this case was opened. Docs. 4-9. On December 4, 2012, Plaintiff filed a request for a temporary restraining order ("TRO") seeking to halt the sale of Monarch's assets until the Court could rule on its application for ex parte provisional relief. Doc. 11. A December 5, 2012 Order denying the TRO request questioned, among other things, whether this Court has jurisdiction to hear Plaintiff's California Code of Civil Procedure 1281.8(b) request for a provisional remedy during a pending arbitration. Doc. 12.

Before the Court for decision is Defendants' motion to dismiss, which argues: (1) the Court lacks subject matter jurisdiction over this action because the parties agreed to arbitrate the dispute; (2) the Parties agreed to proceed in state court, in Detroit, Michigan; (3) the Parties also agreed that the Agreement would be interpreted pursuant to Michigan law, not the California statutes cited by Plaintiff; (4) the contract claim is time-barred. The motion does not specify upon which sub-part(s) of Federal Rule of Civil Procedure 12 Defendants rely, but these arguments appear to invoke Rule 12(b)(1)(lack of subject-matter jurisdiction), 12(b)(3)(improper venue); and 12(b)(6)(failure to state a claim). Plaintiff filed an opposition. Doc. 15. The matter was submitted for decision without oral argument pursuant to Local Rule 230(g).


A.Subject Matter Jurisdiction.

Defendants first argue that this Court lacks subject matter jurisdiction over this action because the parties agreed to arbitrate this dispute. Federal Rule of Civil Procedure 12(b)(1) provides for dismissal of an action for "lack of subject-matter jurisdiction." Faced with a Rule 12(b)(1) motion, a plaintiff bears the burden of proving the existence of the court's subject matter jurisdiction. Thompson v. McCombe, 99 F.3d 352, 353 (9th Cir. 1996). A federal court is presumed to lack jurisdiction in a particular case unless the contrary affirmatively appears. Gen. Atomic Co. v. United Nuclear Corp., 655

F.2d 968, 968--69 (9th Cir. 1981). In a facial attack upon subject matter jurisdiction, "the challenger asserts that the allegations contained in a complaint are insufficient on their face to invoke federal jurisdiction." Safe Air for Everyone v. Meyer, 373 F.3d 1035, 1038 (9th Cir. 2004). In such an attack, "[t]he factual allegations of the complaint are presumed to be true, and the motion is granted only if the plaintiff fails to allege an element necessary for subject matter jurisdiction." Id.

Plaintiff, a Delaware corporation with its principle place of business in Houston, Texas, properly invokes this Court's diversity jurisdiction over its contract-based claims, as there is complete diversity of citizenship and the amount in controversy exceeds $75,000 dollars. See 28 U.S.C. § 1332; Doc. 1. Although neither party invokes or mentions the Federal Arbitration Act ("FAA"), it is relevant insofar as it permits a party to "any suit or proceeding ... brought in any of the courts of the United States upon any issue referable to arbitration under an agreement in writing for such arbitration" to request a stay "until such arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration." 9 U.S.C. § 3. Although it less than common for a plaintiff already actively arbitrating a contract dispute to file a contract claim in federal court along with a request to stay that claim, the Court is unaware of any rule absolutely precluding such a procedural approach.

Likewise, Plaintiff's second claim seeks the provisional remedy of attachment, invoking both Federal Rule of Civil Procedure 64 and Cal. Civ. Proc. Code §§ 481. Defendants have not cited and the Court is unaware of any authority that demonstrates this Court lacks subject-matter jurisdiction over such a request in a diversity action. Whether this allegation fails to state a claim under Rule 12(b)(6) is addressed separately below.

Defendants' motion to dismiss for lack of subject matter jurisdiction is DENIED.


Defendants next argue that the parties agreed that any disputes over the Agreement would be resolved in state court in Detroit, Michigan, citing Section 17.B of the Agreement, which provides that, once arbitration is initiated, each Party may choose one of a panel of three arbitrators. If the two chosen arbitrators cannot agree upon a third, the third arbitrator will be chosen by a "District Judge serving [in] Wayne County, Michigan." This appears to be an attempt by Defendants to argue that the agreement contained a forum selection clause. A motion to enforce a forum selection clause is treated as a motion to dismiss pursuant to Rule ...

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