Commercial Litigation and Arbitration

Should Motion to Dismiss Based on Arbitration Clause Be Filed under Rule 12(b)(6) or 12(b)(3)? Caselaw Split — Answer Determines Materials Court Can Consider on Motion

Washington v. Roosen, Varchetti & Oliver, PPLC, 2012 U.S. Dist. LEXIS 141048 (W.D. Mich. Sept. 17, 2012):

This matter comes before the Court on two motions to dismiss. (ECF Nos. 5 and 6.) Defendant Web Equity ("Web Equity") filed the first motion to dismiss, along with a supporting brief. (ECF No. 5.) Defendant Roosen, Varchetti & Oliver ("Roosen") filed the second motion to dismiss, along with a supporting brief. (ECF No. 6.) Defendant Main Street Acquisitions ("Main Street") has not filed any motion. Plaintiffs Gail Washington and Troy Merrill (collectively "Plaintiffs") filed a collective response to the two motions. (ECF No. 7.) Defendant Roosen filed a reply in support of its motion. (ECF No. 10.) Defendant Web Acquisitions did not file a reply brief. A hearing on the two motions was held on August 18, 2012.

Gail Washington ("Washington") and Troy Merrill ("Merrill") filed a class-action lawsuit against Web Equity, Roosen, and Main Street (collectively "Defendants"). Plaintiffs allege that Defendants routinely file debt-collection actions in Michigan state courts. Plaintiffs allege that, as part of the state-court debt-collection actions, Defendants fraudulently accused the debtors of fraud. Plaintiffs allege that Defendants' accusations were made without any factual basis. Plaintiffs assert three counts: (1) violations of the Fair Debt Collection Practices Act ("FDCPA"), (2) violations of the Michigan Collection Practices Act ("MCPA"), and (3) violations of the Michigan Occupational Code ("MOC"). In short, Defendants are being sued for falsely accusing Plaintiffs of making false statements. ***


Roosen brings its motion under Fed. R. Civ. P. 12(b)(3) and (b)(6). Roosen first argues that Merrill's credit agreement contains an arbitration provision and requests that Merrill's complaint be dismissed in favor of arbitration. Roosen argues, in the alternative, that the complaint fails to state a cause of action, repeating the arguments made by Web Equity.

A. Under What Subsection of Rule 12 Should Roosen's Arbitration Claim Be Considered?

Roosen argues that the portion of his motion to dismiss on the basis of an arbitration clause should be considered under Rule 12(b)(3), which authorizes a court to dismiss a claim on the basis of improper venue. Roosen argues the majority of circuit courts have concluded that motions to dismiss based on forum selection clauses should be brought under Rule 12(b)(3).

The Federal Rules of Civil Procedure govern proceedings brought under Title 9 of the United States Code, relating to arbitration. Fed. R. Civ. P. 81(a)(6)(B). Rule 12(b)(3) authorizes a motion on the basis of "improper venue." "However, a Rule 12(b)(3) motion to dismiss for improper venue is simply the procedural vehicle by which to challenge improper venue; the Rules of Civil Procedure do not contain any venue provisions or requirements. The requirements for venue are set by statute, as are the remedies available for improper and inconvenient venue." Kerobo v. Southwest Clean Fuels Corp., 285 F.3d 531, 538 (6th Cir. 2002). Congress has set forth the venue requirements for suits filed in federal court. See 28 U.S.C. § 1391. Congress has also set forth the requirements for changing the venue of suits filed in federal court. See 28 U.S.C. § 1404. The Sixth Circuit has held that "a forum selection clause should not be enforced through dismissal for improper venue under FRCP 12(b)(3) because these clauses do not deprive the court of proper venue." Wong v. PartyGaming, Ltd., 589 F.3d 821, 830 (6th Cir. 2009) (citing Kerobo, 285 F.3d at 535). Where the defendant seeks to enforce a forum-selection clause in a contract, the Sixth Circuit has indicated that a motion should be brought under Rule 12(b)(6) to dismiss the action or under § 1404(a) to transfer venue. See Langley v. Prudential Mortg. Capital Co., LLC, 546 F.3d 365, 369 (6th Cir. 2008) (per curiam).

Although the Sixth Circuit has not clarified the proper vehicle for bringing a motion to dismiss on the basis of an arbitration clause, see Security Watch, Inc. v. Sentinel Sys., Inc., 176 F.3d 369, 371 n.2 (6th Cir. 1999), this Court has previously held that such motions to dismiss are properly brought under Rule 12(b)(6). See HRL Land or Sea Yachts v. Travel Supreme, Inc., No. 1:07-cv-945, 2009 U.S. Dist. LEXIS 3615, 2009 WL 125845, at * 3 (W.D. Mich. Jan. 16, 2009) (Maloney, C.J.) (citing High v. Capital Senior Living Props. 2 - Heatherwood, Inc., 594 F. Supp.2d 789, 795 (E.D. Mich. 2008) and Moore v. Ferrellgas, Inc., 533 F. Supp.2d 740, 744 (W.D. Mich. 2008)). Notably, neither Kerobo nor Wong involved an arbitration clause.


Roosen argues that "most federal courts of appeals consider a motion to dismiss based on a contractual arbitration clause as an objection to venue and hence properly raised under Rule 12(b)(3)" and citing, as examples, Auto. Mechs. Local 701 Welfare and Pension Funds v. Vanguard Car Rental USA, Inc., 502 F.3d 740, 746 (7th Cir. 2007) and Lipcon Underwriters at Lloyd's, London, 148 F.3d 1285, 1290 (11th Cir. 1998). (Roosen Br. 4.) First, neither Automobile Mechanics nor Lipcon Underwriters is binding on this court, while Kerobo and Wong are binding. Under Sixth Circuit precedent, forum-selection clauses, which are contract issues, are not properly enforced as venue motions, which are governed by statute. Second, the authority on which Automobile Mechanics and Lipcon Underwriters rely recognizes that the Sixth Circuit has reached a different conclusion. Automobile Mechanics and Lipcon Underwriters both cite 5b Charles A Wright and Arthur R. Miller, Federal Practice and Procedure, § 1352. Auto. Mechs., 502 F.3d at 746; Lipcon Underwriters, 148 F.3d at 1289. Wright and Miller recognize that a circuit split exists on the issue of "whether dismissal of the action is proper pursuant to Rule 12(b)(3) or Rule 12(b)(6) when it is based on one of these forum selection clauses rather than on noncompliance with a federal venue statute; . . . ." Wright and Miller, § 1352 at 318-19. In the relevant footnote, Wright and Miller cite Kerobo for the Sixth Circuit's holding on the issue. Id. at 319 n.5 Third, the word "venue" has a specific meaning in the relevant statute, which undermines the application of Rule 12(b)(3) to arbitration clauses. "Venue" is a place and, under 28 U.S.C. § 1391, venue refers to a "judicial district." Federal judicial districts are places defined by specific geographic boundaries. Arbitration clauses, unlike forum selection clauses, do not always select a geographic location for the arbitration to occur. When parties agree to arbitration, as an alternative to court action, the parties have not necessarily agreed to a specific venue, judicial district, or geographic location. By agreeing to arbitration, the parties are agreeing to an alternative means of resolving the dispute, not necessarily an alternative geographic location. Certainly, some arbitration clauses will also contain forum-selection clauses.

B. Should This Court Consider the Credit Card Agreement Attached to Roosen's Motion?

Ordinarily, when considering a motion brought under Rule 12(b)(6), the court considers only whether the facts alleged in the pleadings, taken as true, state a claim upon which relief may be granted. If matters outside the pleadings are presented as part of a Rule 12(b)(6) motion, the court must either exclude the matters or treat the motion as one brought under Rule 56. Fed. R. Civ. P 12(d). A court may consider matters outside the pleadings, but only under limited circumstances. A court may consider, as part of a Rule 12(b)(6) motion, "matters of public record, orders, items appearing in the record of the case, and exhibits attached to the complaint," as well as "documents that a defendant attaches to a motion to dismiss . . . if they are referred to in the plaintiff's complaint and are central to her claim." Amini v. Oberlin Coll., 259 F.3d 493, 502 (6th Cir. 2001). If the court opts to treat the motion as one for summary judgment, the parties must be given a reasonable opportunity to present all the material pertinent to the motion. Fed. R. Civ. P. 12(d).

The credit-card agreement attached as an exhibit to Roosen's motion (ECF No. 6-5 Ex. D) is not a matter this Court may consider as part of a Rule 12(b)(6) motion. The exhibit is not a public record, a court order, or an item appearing in the record of the case. The exhibit was not attached to the federal complaint. The credit card agreement is not referred to in the federal complaint. Although the credit card agreement may have been central to the complaint in state court, it is not central to the complaint here in federal court, which arises from the statements made in the state-court complaint. Although Roosen alleges the credit-card agreement was sent to Plaintiffs as part of discovery in the state-court action, Roosen neglected to attach any documentation to its reply brief to support that allegation.

This Court will not treat the Rule 12(b)(6) motion as a motion under Rule 56. This Court has not given the parties notice that the motion would be treated as a motion for summary judgment. Even if this Court were to treat the motion as one for summary judgment, the credit-card agreement, as presented, would not be considered. Before a court may consider evidence in a motion for summary judgment, the evidence must be admissible at trial. See Alexander v. CareSource, 576 F.3d 551, 558 (6th Cir. 2009). In opposing a motion for summary judgment, however, the evidence need not be submitted in a form that is admissible at trial. Id. (citing Celotex, 477 U.S. at 324); Alpert v. United States, 481 F.3d 404, 409 (6th Cir. 2007) (citing U.S. Structures, Inc. v. J.P. Structures, Inc., 130 F.3d 1185, 1189 (6th Cir. 1997)). On a motion for summary judgment, a district court should not consider documents that are not authenticated. Magnum Towing & Recovery v. City of Toledo, 287 F. App'x 442, 448 (6th Cir. 2008) (citations omitted); see Alexander, 576 F.3d at 558 (explaining the court's "repeated emphasis that unauthenticated documents do not meet the requirements of Rule 56(e)."). Plaintiffs, here the nonmoving party, have raised the question of authenticity and admissibility in their response. See Fed. R. Civ. P. 56(c)(2); Moore v. Holbrook, 2 F.3d 697, 699 (6th Cir. 1993).<

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