F IL E D
United States Court of Appeals
Tenth Circuit
PU BL ISH
August 23, 2006
U N IT E D ST A T E S C O U R T O F A P PE A L S
Elisabeth A. Shumaker
Clerk of Court
T E N T H C IR C U IT
1M AGE SOFTW ARE, IN C., a
Colorado corporation,
Plaintiff - Appellant,
v.
TH E REY N O LD S A N D REY N OLDS
COM PA NY, an Ohio corporation;
COLORADO IM PORT M OTORS
LIM ITED, a Colorado corporation;
DELLENBACH CHEVROLET, IN C.,
a Colorado corporation; M IK E
NAUGHTON FORD, IN C., a
Colorado corporation; OW EN
FARIC Y M OTOR COM PANY, a
C olorado corporation; G EB HA RDT
AUTOM OTIVE, INC., a Colorado No. 04-1533
corporation; M C CA D D O N
OLDSM OBILE-CADILLAC, IN C., a
C olorado corporation; B RO A D WAY
DODGE, a Colorado corporation;
FISCHER CHEVROLET, IN C., a
C olorado corporation; G LEN WOOD
SPR INGS M OTORS, a Colorado
corporation; KARICO, INC. (Pro-Chry
Jeep), a Colorado corporation; KORF
M OTORS, a Colorado corporation;
LUBY CHEVROLET, a Colorado
corporation; M ARKLEY M OTORS, a
Colorado corporation; M EDV ED
CHEVROLET, INC., a Colorado
corporation; PENKHUS M OTOR, a
Colorado corporation; RO TH
CHEVROLET, INC., a Colorado
corporation; SELLERS, IN C, a
Colorado corporation; W EAV ER
BEATTY, a Colorado corporation,
Defendants - Appellees.
A ppeal from the U nited States D istrict C ourt
for the D istrict of C olorado
(D .C . N o. 02-K -1688-JL K )
James A. Jablonski, Gorsuch Kirgis LLP, Denver, Colorado, for
Plaintiff - A ppellant.
David A. Rabin, M orris, M anning & M artin, L.L.P., Atlanta, Georgia (Jo Ann M .
Zboyan, Springer & Steinberg, P.C., Denver, Colorado, and Jeffrey S. George,
Hogan & Hartson, L.L.P., Colorado Springs, Colorado, with him on the briefs),
for D efendants - A ppellees.
Before T A C H A , Chief Judge, E B E L, and M cC O N N E L L , Circuit Judges.
E B E L, Circuit Judge.
1mage Software, Inc. (“1mage”) appeals the district court’s decision
compelling arbitration, in Ohio, of a dispute arising under a software licensing
agreem ent. B efore reaching the merits of this appeal, we must address two
potential problems with the district court’s jurisdiction. First, we conclude the
district court had subject matter jurisdiction based upon the federal question
presented by 1mage’s claim asserted under the Copyright Act. In reaching this
2
conclusion, we adopt the Second Circuit’s analysis for distinguishing between
state-law claims alleging breach of a contract involving copyrighted matters and
those asserting an actual controversy under the federal Copyright Act. Second,
although this court has previously held, in Ansari v. Qwest Communications
Corp., 414 F.3d 1214 (10th Cir. 2005), that a district court does not have the
authority under the Federal Arbitration Act (FA A”), 9 U.S.C. § 4, to compel
arbitration in another district, this was not a jurisdictional prerequisite, but was
instead a venue requirement that the parties have waived in this case. Reaching
the merits, we AFFIRM the district court’s decision to compel arbitration.
I. BACKGROUND1
1mage creates computer document imaging software used by the
automotive industry. Defendant-Appellee Reynolds and Reynolds Company
(“Reynolds”) sought to market 1mage’s software, primarily to car dealerships. To
that end, 1mage and Reynolds entered into a licensing agreement on M ay 4, 1994
(“1994 agreement”). 2 Through that agreement, 1mage granted Reynolds a
perpetual license to use, market and distribute 1mage’s software. The parties also
agreed to arbitrate any dispute arising from this licensing agreement. Any such
1
Like the district court, we rely on the undisputed allegations of the parties
for these background facts.
2
The 1994 agreement was between 1mage, its parent company, Information
Software, Inc. (“ISI”), and Reynolds. The 1994 agreement’s references to ISI
included both ISI and 1mage.
3
arbitration was to occur in Dayton, Ohio.
Two years later, in 1996, 1mage and Reynolds entered into a “M aintenance
Agreement” (“1996 agreement”) for the software 1mage had licensed Reynolds to
use through the previous 1994 agreement. In addition, through this 1996
agreement, Reynolds obtained a newer version of 1mage’s software, Release 5.5.
Although this 1996 agreement did not include an arbitration provision, it did
contain a merger clause which provided that “[t]his Agreement is the exclusive
statement of the entire agreement between 1M AGE and [Reynolds] and
supersedes all prior oral or written representations or agreements between the
parties, except the Software Licensing Agreement dated M ay 4, 1994.”
(Emphasis added.) The 1996 agreement further provided that either party could
terminate that maintenance agreement w ith ninety days’ notice to the other party.
Reynolds renewed the maintenance agreement for several years by paying an
annual maintenance fee, but in January 2002 it notified 1mage that it had decided
to terminate the maintenance agreement effective April 21, 2002. In response,
1mage informed Reynolds that it no longer had any license to use 1mage’s
Release 5.5 software. W hen Reynolds continued using and marketing
Release 5.5, 1mage sued Reynolds, along with nineteen car dealers who had
obtained 1mage’s software from Reynolds (collectively “Defendants”). 1mage
commenced this litigation in federal court in Colorado, alleging three claims:
4
1) Defendants were infringing on 1mage’s copyrighted software, in violation of
the Copyright Act, 17 U.S.C. §§ 101-1332; 2) Reynolds had misappropriated
1mage’s trade secrets, contrary to Colo. Rev. Stat. §§ 7-74-101 through -110; and
3) an accounting of Reynolds’s revenues w as needed in light of Reynolds’s
copyright and trade-secrets violations.
Pursuant to the Federal Arbitration Act (“FAA”), Reynolds filed a motion
under 9 U.S.C. §§ 3 and 4 to stay the federal litigation and to compel arbitration
of these claims. 3 The district court granted that motion. See 1mage Software,
Inc. v. R eynolds & R eynolds C o., 273 F. Supp. 2d 1168 (D. Colo. 2003). An
arbitrator in Ohio ultimately aw arded Reynolds just under $400,000 in damages.
The district court confirmed the arbitrator’s judgment and award. 1mage now
appeals, challenging the district court’s order and jurisdiction granting Reynolds’
3
The FAA provides that
[i]f any suit or proceeding be brought in any of the courts of the United
States upon any issue referable to arbitration under an agreement in
writing for such arbitration, the court in which such suit is pending,
upon being satisfied that the issue involved in such suit or proceeding
is referable to arbitration under such an agreement, shall on application
of one of the parties stay the trial of the action 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. As explained in greater detail below, § 4 sets forth the procedures
by which a party can seek to enforce an agreement to arbitrate.
5
motion to compel arbitration. Having jurisdiction under 9 U.S.C. § 16(a)(3) 4 and
28 U.S.C. § 1291 to consider this appeal from the district court’s final judgment,
we AFFIRM the district court’s decision.
II. ISSU E S
A. W hether the district court had subject m atter jurisdiction.
Federal courts “have an independent obligation to determine whether
subject-matter jurisdiction exists, even in the absence of a challenge from any
party,” and thus a court may sua sponte raise the question of whether there is
subject matter jurisdiction “at any stage in the litigation.” A rbaugh v. Y & H
Corp., — U.S. — , 126 S. Ct. 1235, 1240, 1244 (2006). W hile the parties in this
case never questioned the federal courts’ subject matter jurisdiction over this
action, the district court itself raised its own concern about it, but ultimately
concluded it did have subject matter jurisdiction. See 1mage Software, Inc., 273
F. Supp. 2d at 1171. After considering the issue, we agree.
1. Standard of review
This court review s “de novo whether subject matter jurisdiction is proper in
this case.” A ustralian Gold, Inc. v. Hatfield, 436 F.3d 1228, 1234 (10th Cir.
2006).
4
9 U.S.C. § 16(a)(3) provides that “[a]n appeal may be taken from . . . a
final decision with respect to an arbitration that is subject to this title.”
6
2. A nalysis
In its complaint, 1mage invoked the federal courts’ subject matter
jurisdiction under 28 U.S.C. § 1331, which provides that “[t]he district courts
shall have original jurisdiction of all civil actions arising under the Constitution,
laws, or treaties of the United States;” 5 and 28 U.S.C. § 1338(a), which further
provides that “[t]he district courts shall have original jurisdiction of any civil
action arising under any Act of Congress relating to patents, plant variety
protection, copyrights and trademarks. Such jurisdiction shall be exclusive of the
courts of the states in patent, plant variety protection and copyright cases.”
(Emphasis added.) Because the only federal-law claim 1mage alleged was its
claim under the Copyright Act, the district court’s subject matter jurisdiction rests
solely on that claim. 6 The district court’s concern with its jurisdiction was that,
5
“A case ‘arises under’ federal law within the meaning of § 1331 . . . if a
well-pleaded complaint establishes either that federal law creates the cause of
action or that the plaintiff’s right to relief necessarily depends on resolution of a
substantial question of federal law.” Empire Healthchoice Assurance, Inc. v.
M cVeigh, — U.S. — , 126 S. Ct. 2121, 2131 (2006) (alteration, quotations
omitted).
6
Although the district court indicated 1mage also asserted the district court
had subject matter jurisdiction based on diversity, see 1mage Software, Inc., 273
F. Supp. 2d at 1171, that cannot be the case because the parties are not
diverse–both 1mage and the auto dealers 1mage sued are Colorado corporations.
See 28 U.S.C. § 1332(a)(1), (c)(1); see also Radil v. Sanborn W . Camps, Inc., 384
F.3d 1220, 1225 (10th Cir. 2004) (noting that, “to establish subject matter
jurisdiction under 28 U.S.C. § 1332, a party must show that compete diversity of
citizenship exists between the parties and that the amount in controversy exceeds
(continued...)
7
while 1mage pled a claim under the Copyright Act, that claim was based upon
1mage’s allegations implicating the parties’ 1994 and 1996 agreements. If
1mage’s copyright claim was actually a state-law breach-of-contract claim that
just happened to involve copyrighted material, then it would not be sufficient to
invoke the district court’s subject matter jurisdiction. See 1mage Softw are, Inc.,
273 F. Supp. 2d at 1171. Nevertheless, the district court concluded that it had
subject matter jurisdiction in this case because 1mage had, in its complaint,
requested a remedy “expressly provided under the [Copyright] Act.” Id. In
6
(...continued)
$75,000”). 1mage also asserted a trade-secrets claim, but it did so under
Colorado law . The district court would have had supplemental jurisdiction to
consider this Colorado law claim, see 28 U.S.C. § 1367, only if it had subject
matter jurisdiction in the first place. See Nicodemus v. Union Pac. Corp., 440
F.3d 1227, 1235 n.8 (10th Cir. 2006) (noting that, under 28 U.S.C. § 1367, “[i]f
any one claim within Plaintiffs’ complaint supports federal question jurisdiction,
a federal court may assert jurisdiction over all the claims, including any alleged
state-law claims, arising from the same core of operative facts”). So the question
of w hether the district court had subject matter jurisdiction to consider 1mage’s
action turns solely on 1mage’s claim asserted under the federal Copyright Act.
And, although Reynolds, as a defendant, later invoked the Federal
Arbitration Act, that act itself does not confer federal jurisdiction over a
proceeding. See M oses H. Cone M em’l Hosp. v. M ercury Constr. Corp., 460 U.S.
1, 26 n.32 (1983); U. S. Energy Corp. v. Nukem, Inc., 400 F.3d 822, 829 (10th
Cir. 2005); 3 Federal Procedure, L. Ed. § 4:36 (1981); see also 13B Charles Alan
W right, et al., Federal Practice and Procedure § 3569 (2d ed. 1984). Rather, there
must still be an independent basis for the district court’s subject matter
jurisdiction. See M oses H. Cone M em’l Hosp., 460 U .S. at 26 n.32; see also
3 Federal Procedure, L. Ed. § 4:36; 13B W right, et al., Federal Practice &
Procedure § 3569.
8
reaching this conclusion, the district court relied on Second Circuit authority. See
id. (citing Bassett v. M ashantucket Pequot Tribe, 204 F.3d 343 (2d Cir. 2000),
and T.B. Harms Co. v. Eliscu, 339 F.2d 823 (2d Cir. 1964)). W e agree with that
authority and take this opportunity to adopt the Second Circuit’s analytical
approach.
The Second Circuit has set forth “[t]he most frequently cited test” for
determining whether an action arises under the Copyright Act. Gener-Villar v.
Adcom G roup, Inc., 417 F.3d 201, 203 (1st Cir. 2005). “It is well-established that
not every complaint that refers to the Copyright Act ‘arises under’ that law for
purposes of [28 U.S.C. §] 1338(a).” Bassett, 204 F.3d at 347 (quoting 28 U.S.C.
§ 1338(a)). “In particular, the federal grant of a copyright has not been thought to
infuse with any national interest a dispute as to ownership or contractual
enforcement turning on the facts or on ordinary principles of contract law.” Id.
(quotations, alteration omitted).
W hether a complaint asserting factually related copyright and contract
claims “arises under” the federal copyright laws for the purposes of
Section 1338(a) “poses among the knottiest procedural problems in
copyright jurisprudence.” 3 M elville B. Nimmer & David N immer,
Nimmer on Copyright § 12.01[A], at 12-4 (1999). . . . Such claims
characteristically arise where the defendant held a license to exploit the
plaintiff’s copyright, but is alleged to have forfeited the license by
breaching the terms of the licensing contract and thus to infringe in any
further exploitation.
9
Id. 7
District courts in the Second Circuit had previously sought to
resolve[] the issue of jurisdiction under Section 1338 for “hybrid”
claims raising both copyright and contract issues by attempting to
discern whether the copyright issues constituted the “essence” of the
dispute, or whether instead the copyright issues were “incidental to” the
contract dispute.
....
That approach, however, left a class of plaintiffs who suffered
copyright infringement bereft of copyright remedies. Plaintiffs whose
federal lawsuits were dismissed for lack of subject matter jurisdiction
on the ground that their copyright claims w ere “incidental to” their
contract claims had no way either to obtain an adjudication of
7
In the same vein, the Ninth Circuit has noted that, although
[t]he federal courts have exclusive jurisdiction over “any civil action
arising under any Act of Congress relating to . . . copyrights[,]” . . . it
is well established that just because a case involves a copyright does not
mean that federal subject matter jurisdiction exists. Federal courts have
consistently dismissed complaints in copyright cases presenting only
questions of contract law . A s a result, the federal courts walk a fine
line between usurping the power of the state courts and providing
redress for copyright infringement. This balancing act is further
complicated by the interdependence of contract and copyright claims,
which can camouflage the genuine issues to be resolved.
Scholastic Entm’t, Inc. v. Fox Entm’t Group, Inc., 336 F.3d 982, 985-86 (9th Cir.
2003) (quoting 28 U.S.C. § 1338; citations omitted); see also 13B Charles Alan
W right, et al., Federal Practice & Procedure § 3582 (“A suit on a contract does
not ‘arise under’ the copyright laws even though a copyright may have been the
subject matter of the contract. M ost disputes about ownership of a copyright do
not arise under the copyright laws for purposes of jurisdiction, although there can
be a different result if the case raises an important issue of interpretation of the
Copyright Act.”) (footnotes omitted).
10
infringement or to obtain relief provided by the Copyright Act, because
the Act confers exclusive jurisdiction over copyright claims on federal
courts. Such plaintiffs w ould be deprived of the injunctive relief,
impoundment remedies, statutory damages, and attorneys fees provided
by the [Copyright] Act. That approach had the added defect of
requiring a [federal] court to make findings at the outset of the
litigation that could not be discerned from the complaint but instead
required a deep understanding of the dispute not usually gained until the
case had been heard at trial.
Id. at 347-48 (citations omitted).
The Second Circuit’s solution to this jurisdictional problem was to
“establish[] a test . . . that focused on whether and how a complaint implicates the
Copyright Act.” Id. at 348. Thus, “the analysis . . . turns on what is alleged on
the face of the complaint.” Id. at 349. Applying that test, “a suit ‘arises under’
the Copyright Act if: (1) The complaint is for a remedy expressly granted by the
Act, e.g., a suit for infringement . . . ; or, (2) The complaint asserts a claim
requiring construction of the Act.” 8 Id. at 349 (quotations, alterations omitted);
see also id. at 355. This test “is essentially a reiteration of the ‘well-pleaded
complaint’ rule that federal jurisdiction exists only when a federal question is
8
The Second Circuit noted that “jurisdiction might also exist, ‘perhaps more
doubtfully,’ in a third category of case, ‘where a distinctive policy of the
[Copyright] Act requires that federal principles control the disposition of the
claim.’” Bassett, 204 F.3d at 349 n.3 (quoting T.B. Harms, 339 F.2d at 828); see
also Scholastic Entm’t, Inc., 336 F.3d at 986 (stating Second Circuit’s rule to
“require[] the district court to exercise jurisdiction if: (1) the complaint asks for a
remedy expressly granted by the Copyright Act; (2) the complaint requires an
interpretation of the Copyright Act; or (3) federal principles should control the
claims”).
11
presented on the face of a properly pleaded complaint.” Scholastic Entm’t, Inc.,
336 F.3d at 986.
W e join a number of other circuits in adopting the Second Circuit’s
approach to this difficult jurisdictional issue. 9 See Bassett, 204 F.3d at 349-51
(citing authority 1 0 ); see also Scandinavian Satellite Sys. v. Prime TV Ltd., 291
F.3d 839, 844 (D.C. Cir. 2002) (also adopting Second Circuit’s analytical
approach).
Applying the Second Circuit’s test to this case, it is clear that the district
court had subject matter jurisdiction over 1mage’s copyright claim under
28 U.S.C. § 1338(a). 1mage, in its complaint, specifically alleged a claim under
9
In an analogous situation, this court, in Ausherman v. Stump, 643 F.2d 715
(10th Cir. 1981), previously held that federal courts did not have jurisdiction
under 28 U.S.C. § 1338(a) over a suit “brought on a contract” involving patents.
643 F.2d at 716, 718. In reaching that conclusion, this court focused on the
complaint as pled, noting that “the complaint does not set forth a valid patent
infringement claim,” despite “the fact that Ausherman had liberally sprinkled the
word ‘infringement’ throughout his pleadings.” Id. The approach this court took
in Ausherman is consistent with the Second Circuit’s test w e now adopt.
10
The Second Circuit, in Bassett, 204 F.3d at 350-51, noted the First,
Fourth, Fifth, Ninth and Eleventh Circuits had adopted the Second Circuit’s
approach to this jurisdictional determination: Royal v. Leading Edge Prods., Inc.,
833 F.2d 1, 2 (1st Cir. 1987); Gibraltar, P.R., Inc. v. Otoki Group, Inc., 104 F.3d
616, 619 (4th Cir. 1997); Arthur Young & Co. v. City of Richmond, 895 F.2d
967, 969-70 (4th Cir. 1990); Goodman v. Lee, 815 F.2d 1030, 1031 (5th Cir.
1987); Rano v. Sipa Press, Inc., 987 F.2d 580, 584 (9th Cir. 1993); Vestron, Inc.
v. Home Box Office Inc., 839 F.2d 1380, 1381 (9th Cir. 1988); M CA Television
Ltd. v. Pub. Interest Corp., 171 F.3d 1265, 1269-70 (11th Cir. 1999); see also
Gener-Villar, 417 F.3d at 203-04 (reaffirming that First Circuit has adopted
Second Circuit’s analysis).
12
the Copyright Act for copyright infringement, see 17 U.S.C. § 501, and sought
actual damages and profits or, in the alternative, statutory damages, as well as
costs and attorney’s fees specifically provided for under the Copyright Act, see id.
§§ 504-05. Based upon those allegations, the district court properly concluded
that it had subject matter jurisdiction over 1mage’s copyright claim. See Bassett,
204 F.3d at 355-56 (holding federal court had subject matter jurisdiction because
plaintiff had alleged copyright infringement and sought injunctive remedy
provided for by the Copyright Act); see also M CA Television Ltd., 171 F.3d at
1269-70 (holding federal court had subject matter jurisdiction over copyright
infringement claim seeking preliminary injunction and damages provided for by
the Copyright Act); Rano, 987 F.2d at 584 (holding federal court had subject
matter jurisdiction over claim seeking injunction, impoundment, “damages and
profits,” and attorney’s fees provided for under Copyright Act); Arthur Young &
Co., 895 F.2d at 971 (holding federal court had subject matter jurisdiction over
claim alleging copyright infringement and seeking damages and injunctive relief
under Copyright Act); Vestron, Inc., 839 F.2d at 1381-82 (holding federal court
had subject matter jurisdiction over claim for copyright infringement seeking an
injunction, “damages and profits,” costs and attorney’s fees under Copyright Act).
B. W hether the C olorado district court could com pel arbitration in
O hio.
This case presents a second possible jurisdictional problem. In Ansari, w e
13
held that a district court does not have authority to compel arbitration in another
district. 1 1 See 414 F.3d at 1219-20. Yet, in this case, the Colorado district court
granted Reynolds’s motion to compel arbitration in Ohio. At the time, neither
party questioned the district court’s authority to do so. 1 2 The question presented
by this appeal, then, is whether the rule announced in Ansari is jurisdictional; that
is, whether the district court was w ithout any power to adjudicate Reynolds’s
motion to compel arbitration. W e conclude that Ansari did not state a
jurisdictional prerequisite; rather, Ansari’s rule is one of venue which the parties
in this case have waived by not raising the issue before the district court. 1 3 See
11
Ansari further held that a district court is also without authority to compel
arbitration in its own district if that would contravene the forum-selection
provisions in the arbitration agreement. See 414 F.3d at 1219-20. That aspect of
Ansari is not at issue in this case because neither party argues that the district
court should have compelled arbitration in Colorado, contrary to their 1994
agreement.
12
1mage did contest the motion to compel arbitration generally, but it did
not raise this particular challenge to the district court’s authority to compel
arbitration.
13
Venue is som etim es confused with jurisdiction. [However,] the
two concepts are quite different. As the Supreme Court put it in a
leading case:
The jurisdiction of the federal courts – their power to
adjudicate – is a grant of authority to them by Congress
and thus beyond the scope of litigants to confer. But the
locality of a law suit – the place where judicial authority
m ay be exercised – though defined by legislation relates to
(continued...)
14
Harris Capital Fund, LLC v. Grillo, 160 F. App’x 727, 728 (10th Cir. 2005)
(unpublished) (treating Ansari as addressing venue).
1. Standard of review
W e review this possible jurisdictional problem de novo. See Huerta v.
Gonzales, 443 F.3d 753, 755 (10th Cir. 2006) (noting “we review issues of
jurisdiction de novo”).
2. A nalysis
Ansari based its decision that a district court did not have the authority to
compel arbitration in another district on the language of 9 U.S.C. § 4. See
13
(...continued)
the convenience of litigants and as such is subject to their
disposition. This basic difference betw een the court’s
power and the litigant’s convenience is historic in the
federal courts.
This distinction between the court’s power to adjudicate and the
place where that authority m ay be exercised must always be recognized.
It has two im portant consequences. Because venue is for the
convenience of litigants it is a personal privilege of the defendants and
can be waived by them. In this respect it is sim ilar to jurisdiction over
the person of defendants, which also can be waived, but unlike
jurisdiction of the subject m atter, which cannot be waived by the
parties. The other consequence is that if the statutory rules on venue
are not followed, and objection is m ade on the ground of im proper
venue, the action cannot be heard in that district, even though the court
m ay have jurisdiction over the subject m atter and over the defendants.
15 Charles Alan W right, et al., Federal Practice & Procedure § 3801 (2d ed. 1986)
(quoting Neirbo Co. v. Bethlehem Shipbuilding Corp., 308 U.S. 165, 167-68
(1939)) (footnotes, further quotation om itted).
15
Ansari, 414 F.3d at 1218-20. Section 4 addresses motions to enforce arbitration
agreements by compelling arbitration and specifically provides that “[t]he hearing
and proceedings, under such agreement [to arbitrate], shall be within the district
in which the petition for an order directing such arbitration is filed.” 1 4 Other
circuits have referred to this language in § 4 as a venue provision. See Dumont v.
Saskatchewan Gov’t Ins., 258 F.3d 880, 887-88 (8th Cir. 2001); Doctor’s Assocs.,
Inc. v. Stuart, 85 F.3d 975, 983 (2d Cir. 1996); M errill Lynch, Pierce, Fenner, &
Smith, Inc. v. Lauer, 49 F.3d 323, 327 (7th Cir. 1995); Econo-Car Int’l, Inc. v.
Antilles Car Rentals, Inc., 499 F.2d 1391, 1394 & n.14 (3d Cir. 1974); Farr & Co.
v. Cia. Intercontinental de N avegacion de Cuba, 243 F.2d 342, 346 (2d Cir.
14
M ore fully, 9 U.S.C. § 4 provides in relevant part:
A party aggrieved by the alleged failure, neglect, or refusal of
another to arbitrate under a written agreement for arbitration may
petition any United States district court which, save for such agreement,
would have jurisdiction under Title 28, in a civil action or in admiralty
of the subject matter of a suit arising out of the controversy between the
parties, for an order directing that such arbitration proceed in a manner
provided for in such agreement. . . . The court shall hear the parties,
and upon being satisfied that the making of the agreement for
arbitration or the failure to comply therewith is not in issue, the court
shall make an order directing the parties to proceed to arbitration in
accordance w ith the terms of the agreement. The hearing and
proceedings, under such agreement, shall be w ithin the district in which
the petition for an order directing such arbitration is filed. If the
making of the arbitration agreement or the failure, neglect or refusal to
perform the same be in issue, the court shall proceed summarily to the
trial thereof.
16
1957); see also John W . Hinchey & Thomas V. Burch, The Effect of
Forum-Selection Clauses on a District Court’s Pow er to Compel Arbitration, 60
Disp. Resol. J. 55, 55, 56-57 (Nov. 2005-Jan. 2006); Venue of M otion to Compel,
60 Disp. Resol. J. 91 (Aug-Oct. 2005). M ost relevant to this case, the Third and
Seventh Circuits specifically referred to § 4 as a venue provision even as they
held that under § 4’s mandatory language, a district court could not compel
arbitration in another district. See Lauer, 49 F.3d at 327-28; Econo-Car Int’l,
Inc., 499 F.2d at 1394.
And courts have analogously treated other, similar FA A provisions as
venue requirements. In Cortez Byrd Chips, Inc. v. Bill H arbert Construction Co.,
529 U.S. 193 (2000), for example, the Supreme Court specifically addressed
9 U.S.C. §§ 9-11 as venue provisions. Id. at 195. Like § 4, 9 U.S.C. §§ 9-11
specify in which court certain arbitration proceedings under the FAA should take
place. 1 5 In Cortez Bird Chips, Inc., the Supreme Court held that §§ 9-11 were
15
Section 9 provides, in relevant part:
If the parties in their agreem ent have agreed that a judgment of the
court shall be entered upon the award made pursuant to the arbitration,
and shall specify the court, then at any time within one year after the
award is made any party to the arbitration may apply to the court so
specified for an order confirming the award, and thereupon the court
must grant such an order unless the award is vacated, modified, or
corrected as prescribed in sections 10 and 11 of this title. If no court
is specified in the agreement of the parties, then such application m ay
(continued...)
17
permissive (rather than restrictive) venue provisions. See 529 U.S. at 195, 204.
Although this court, in Ansari, distinguished the permissive venue provisions at
issue in Cortez Bird Chips, Inc. from § 4, which instead uses “mandatory”
language, see Ansari, 414 F.3d at 1219, that distinction does not make § 4 any
less a venue provision.
Congress has established “general venue statutes” in 28 U.S.C.
§§ 1391-92. 1 6 15 Charles Alan W right, et al., Federal Practice and Procedure
15
(...continued)
be made to the United States court in and for the district within which
such award was made. 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.
And 9 U.S.C. §§ 10 and 11 authorize the “United States court in and for the
district wherein the [arbitration] award was made” to vacate, modify or correct
that award.
16
In part, those general venue statutes provide that for a case in federal
court based only upon diversity jurisdiction, venue is proper,
except as otherwise provided by law, . . . only in (1) a judicial district
where any defendant resides, if all defendants reside in the same State,
(2) a judicial district in which a substantial part of the events or
om issions giving rise to the claim occurred, or a substantial part of the
property that is the subject of the action is situated, or (3) a judicial
district in which any defendant is subject to personal jurisdiction at the
tim e the action is comm enced, if there is no district in which the action
m ay otherw ise be brought.
28 U.S.C. § 1391(a). And for a case where “jurisdiction is not founded solely
upon diversity of citizenship,” venue is proper,
(continued...)
18
§ 3804; see also id. § 3803; 17 M oore’s Federal Practice § 110.01[3][a] (3d ed.
2006). In addition, however, Congress has also created “special” venue statutes.
See 15 Charles Alan W right, et al., Federal Practice & Procedure § 3804. “A
special venue statute, expressly covering venue of a particular kind of action, will
control over the general venue statutes, but provisions in the general statutes are
read as supplementing the special statute in the absence of contrary restrictive
indications in the special statute.” Id. § 3803 (emphasis added; footnotes
om itted); see also id. § 3804; 17 M oore’s Federal Practice § 110.01[3][b]
(referring to restrictive venue provisions as “exclusive”). It may be that § 4’s
mandatory language makes it a restrictive rather than a permissive venue
provision. See Cortez Bird Chips, Inc., 529 U.S. at 195, 197-204 (discussing
distinction between permissive and restrictive venue provisions in concluding 9
U.S.C. §§ 9-11 are permissive venue provisions); Ansari, 414 F.3d at 1220.
However, parties can waive objections under restrictive venue provisions, just as
they can under general venue provisions. See Radzanower v. Touche Ross & Co.,
16
(...continued)
except as otherwise provided by law, . . . only in (1) the judicial district
where any defendant resides, if all defendants reside in the same State,
(2) a judicial district in which a substantial part of the events or
om issions giving rise to the claim occurred, or a substantial part of the
property that is the subject of the action is situated, or (3) a judicial
district in which any defendant may be found, if there is no district in
which the action m ay otherw ise be brought.
Id. § 1391(b).
19
426 U.S. 148, 149-51 (1976) (noting “[i]t has long been settled that the restrictive
venue provisions of [the National Bank Act, 12 U.S.C.] § 94 can be waived by a
defendant bank”); Interstate Commerce Comm’n v. Atl. Coast Line R. Co., 383
U.S. 576, 577, 579, 597 n.8 (1966) (noting waiver applied to Interstate Commerce
Act’s restrictive venue provisions); Am. Chem. Paint Co. v. Dow Chem. Co., 161
F.2d 956, 958-59 (2d Cir. 1947) (addressing whether parties had waived objection
to venue under 28 U.S.C. § 48, providing for exclusive venue in patent
infringement cases); Luper v. Capital Conveyor (In re Lee W ay Holding Co.), 104
B. R. 881, 885 (Bankr. S.D. Ohio 1989) (noting “[e]ven restrictive venue
provisions can be waived”); see also 15 Charles Alan W right, et al., Federal
Practice and Procedure § 3813 (noting party can waive venue provided by
restrictive, as well as general, venue provisions).
Further, treating these FAA provisions as venue provisions makes sense in
light of the fact that the FAA does not itself confer subject matter jurisdiction.
See M oses H. Cone M em’l Hosp., 460 U.S. at 26 n.32; Nukem, Inc., 400 F.3d at
829. And in fact, an earlier provision of § 4 addresses the need for a
jurisdictional basis independent of the FAA, indicating that a party seeking to
compel arbitration may do so in “any United States district court which, save for
such [arbitration] agreement, would have jurisdiction under Title 28, in a civil
action or in admiralty of the subject matter of a suit arising out of the controversy
20
between the parties.” Finally, § 4 serves the purposes venue statutes traditionally
serve; that is, it “refers to locality, the place where a lawsuit should be heard.” 15
Charles Alan W right, Federal Practice & Procedure, § 3801.
For these reasons, we conclude that Ansari’s holding that a district court
does not have authority to compel arbitration in another district is a statement
addressing venue under the FA A. 1 7 And the parties in this case have waived any
objection to venue because they failed to raise the issue in the district court. See
generally Stjernholm v. Peterson, 83 F.3d 347, 349 (10th Cir. 1996) (noting
parties can waive objection to venue by failing to raise the issue in timely manner
before district court); 15 Charles Alan W right, et al., Federal Practice &
Procedure, § 3826.
C. W hether the district court erred in granting R eynolds’s m otion
to com pel arbitration of the parties’ dispute.
Turning to the merits of this appeal, 1mage argues that the district court
erred in compelling the parties to arbitrate their dispute pursuant to the 1994
agreement. W e disagree.
1. Standard of review
17
Because we conclude Ansari did not deprive the district court of its ability
to adjudicate Reynolds’s motion to compel arbitration, we need not address
Reynolds’s additional argument that 9 U.S.C. § 3, permitting a court to stay
pending litigation while the parties arbitrate, provided the district court in this
case with an alternate jurisdictional basis to adjudicate R eynolds’s motion to
compel arbitration.
21
This court reviews the district court’s decision on a motion to compel
arbitration de novo, employing the same legal standards the district court
employed. See Ansari, 414 F.3d at 1218.
2. A nalysis
The FAA “manifests a liberal federal policy favoring arbitration.”
Comanche Indian Tribe v. 49, L.L.C., 391 F.3d 1129, 1131 (10th Cir. 2004)
(quotations omitted). Nonetheless, “arbitration is a matter of contract and a party
cannot be required to submit to arbitration any dispute which he has not agreed so
to submit.” Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83 (2002)
(quotations omitted). “Absent some ambiguity in the [arbitration]
agreement, . . . it is the language of the contract that defines the scope of disputes
subject to arbitration.” E.E.O.C. v. W affle House, Inc., 534 U.S. 279, 289 (2002).
“As with any other contract, the parties’ intentions control, but those intentions
are generously construed as to issues of arbitrability.” W illiams v. Imhoff, 203
F.3d 758, 764 (10th Cir. 2000) (alteration, quotations omitted).
In this case, 1mage and Reynolds agreed to arbitrate “any dispute [that]
occurs between the parties arising out of or related to [the 1994] A greement or its
negotiation, execution or performance, whether such dispute is in contract, tort or
22
otherwise.” 1 8 In substance, through the 1994 licensing agreement, 1mage granted
Reynolds
a perpetual, fully paid-up, royalty-free, worldwide right and license:
A. to use, demonstrate, copy, and m odify . . . the ISI
Software 1 9 . . . , and
B. to distribute, lease, market and sublicense the ISI
Software . . . ,
. . . on a non-exclusive basis in the automotive industry and automotive
after market (including manufacturers, non-dealer body shops, and parts
18
M ore fully, the 1994 agreement provided:
If any dispute occurs between the parties arising out of or related to this
Agreement or its negotiation, execution or performance, w hether such
dispute is in contract, tort or otherwise, it will be submitted first to
mediation under the mediation rules of the American Arbitration
Association. Should the mediation fail, the dispute will be submitted
to arbitration. . . . Any mediation or arbitration will be held and the
award deemed m ade in Dayton, Ohio. . . . The decision and award of
the arbitrator w ill be final and binding and the award given may be
entered in any court of competent jurisdiction. The parties will be
entitled to discovery to the same extent provided for civil actions in the
Southern District of the State of Ohio. The parties agree to be bound
by the decision of the arbitrator and judgment upon the award rendered
thereby may be entered in any court having jurisdiction within the
Southern District of Ohio. The parties hereby submit to the in
personam jurisdiction of the courts of the State of O hio for all purposes
of this Section and any disputes arising under this Agreement. The
Federal Arbitration Act (9 U.S.C. Sections 1-15), not state law , will
govern the arbitrability of all claims and all aspects of the arbitration.
19
The 1994 licensing agreement included, not only 1mage’s document
imaging software, but also related software which the agreement referred to
together as the “ISI Software.”
23
suppliers), and to other businesses under common control with an
automotive sublicensee[; and]
....
on an exclusive basis . . . to establishments prim arily engaged in retail
sales of new or used automobiles, trucks or tractors . . . , except six (6)
existing reseller agreements and contracts . . . which currently do not
exclude the automotive dealership market . . . [; and]
....
directly to end-users on a non-exclusive basis in all markets other than
those specified [above].
(Footnote omitted.) In exchange for this license, Reynolds paid 1mage a “one
time license fee” of $ 1,750,000.
The 1994 agreement also anticipated that Reynolds could obtain updated
software in the future. Along these lines, 1mage agreed that in the future it would
“provide to Reynolds, at no cost to Reynolds, all updates, upgrades and
enhancements to the Software, so that Reynolds may evaluate w hether it is
appropriate to make each such upgrade or enhancement generally available to its
customers.” If Reynolds chose to do so, it could then purchase those upgrades.
Subsequent updates, upgrades, enhancements and new products
provided by ISI will be made available to Reynolds and becom e a part
of the ISI Software and Documentation, provided the fees (which m ay
be no greater than fees payable by other dealers, distributors or resellers
of the ISI Software) are agreed upon by the parties at that time.
Two years later, in April 1996, Reynolds obtained 1mage’s updated
software, Release 5.5, as part of the parties’ “M aintenance Agreement” for the
24
software 1mage had previously sold Reynolds through the 1994 agreement. The
1996 agreement provided that, in exchange for Reynolds’s payment of an “Annual
M aintenance Charge” of “$175,000 plus a $250 subscription fee for each
licensee,” 1mage would “provide subscription and maintenance service which
includes revisions, updates and enhancements,” “Repair of W arranty Defects,”
“New Versions and Releases” of the software, and “Continuing Education”
covering the software.
The 1996 agreement did not contain an arbitration clause. But it did
include a merger clause providing that “[t]his Agreement is the exclusive
statement of the entire agreement between 1M AGE and [Reynolds] and
supersedes all prior oral or written representations or agreements between the
parties, except the Software Licensing Agreement dated M ay 4, 1994, between
Information Solutions, Inc., 1mage and [Reynolds], as to the subject matter
hereof.” (Emphasis added.)
The 1996 agreement further provided that either party could terminate the
annual maintenance agreement after giving the other party ninety days’ notice.
After Reynolds notified 1mage that it was electing to terminate that agreement
effective April 21, 2002, 1mage asserted that Reynolds would no longer have any
license to use 1mage’s Release 5.5 software. Reynolds, on the other hand, argued
that it retained a license to use that updated software because Release 5.5 had
25
been incorporated into the 1994 agreement’s perpetual license. That dispute
underlies this litigation.
The specific question presented to the district court by Reynolds’s motion
to compel arbitration, then, was w hether this dispute arose out of or was related to
the 1994 agreement and was thus subject to that agreement’s arbitration
provision. In concluding that this dispute did arise out of or was related to the
1994 agreement, the district court recognized that that agreement not only granted
Reynolds a perpetual license in the earlier version of 1mage’s software, but it also
specifically provided for the possibility that Reynolds would acquire later updated
versions of the software from 1mage: The 1994 agreement’s section 5.2 “provides
that [s]ubsequent updates, upgrades, enhancements and new products provided by
[1mage] will be made available to Reynolds and become a part of the ISI
Software provided fees are agreed upon by the parties at that time.” 1mage
Software, Inc., 273 F. Supp. 2d at 1174 (quotations omitted). The district court
then noted that there were several plausible interpretations of the relationship
between the parties’ 1994 and 1996 agreements. First, as 1mage argued, the 1996
agreement could be a licensing agreement for Release 5.5 that was completely
separate from the 1994 perpetual licensing agreement. See id. at 1170. If so, the
license terminated when Reynolds chose to terminate the 1996 maintenance
agreement. See id. Second, as Reynolds argued, through the 1994 agreement’s
26
section 5.2, the updated Release 5.5 that it obtained from 1mage through the 1996
agreement might have become part of the ISI software for which Reynolds had a
perpetual license under the 1994 licensing agreement. If so, the 1996
maintenance agreement might be just that — a maintenance agreement whose
later termination had no effect on the perpetual license, which included Release
5.5. See id. Or the 1996 agreement might have established the fees Reynolds had
agreed to pay 1mage for the updated Release 5.5, which again had been
incorporated into the original licensing agreement’s perpetual license. See id. at
1170 n. 2. Acknowledging these plausible arguments, the district court concluded
that, because Reynolds’ interpretation – that the license to use the updated
Release 5.5 software fell within the 1994 agreement’s § 5.2 and therefore had
been incorporated into the original agreement’s perpetual license – had merit, the
dispute underlying this litigation arose under that 1994 agreement and was thus
subject to arbitration. See id. at 1174. W e cannot improve on the district court’s
analysis; in light of the strong presumption of arbitrability, we agree fully with
the district court’s decision.
In challenging the district court’s decision on appeal, 1mage relies almost
exclusively on this court’s decision in Riley M anufacturing Co. v. Anchor Glass
Container Corp., 157 F.3d 775 (10th Cir. 1998). But Riley does not require a
27
different result. 2 0
In Riley, this court addressed a situation involving two agreements between
the same parties, the first containing a provision requiring arbitration and the
second one without any arbitration provision. See id. at 777-78. These
agreements were between Riley M anufacturing Co. (“Riley”), a company that
produced “‘sun tea’ jars with copyrighted ornamental designs stenciled on” them,
and Anchor Glass Container Corp. (“Anchor”), Riley’s glass jar supplier. Id. at
776. In 1991, Riley and Anchor entered into a manufacturing and distribution
agreement (“manufacturing agreement”) under w hich “Riley agreed to provide all
of Anchor[’s] needs for sun tea jars . . . and Anchor . . . agreed to use reasonable
efforts to market Riley’s sun tea products.” Id. (quotations omitted).
That manufacturing agreement expired in 1994. See id. at 777. In 1995,
Riley threatened to sue Anchor for copyright infringement after it purportedly
discovered that Anchor was still using Riley’s copyrighted designs. See id. The
20
Reynolds asserts that, because 1mage never specifically relied on Riley in
arguing against arbitration in the district court, 1mage has waived any argument
based upon Riley for appeal purposes. 1mage did later rely on Riley in its
motions seeking to have the district court vacate the arbitrator’s awards and its
pleadings arguing against confirmation of that aw ard. But 1mage generally
asserted before the district court many of the same arguments that it now asserts
on appeal, arguing that the 1996 agreement was an entirely separate agreement
from the 1994 agreement, and that the 1996 agreement was a separate licensing
agreement for the newer version of the softw are, which has now been terminated.
W e, therefore, deem 1mage to have sufficiently preserved its argument based
upon Riley.
28
parties then entered into a settlement agreement to resolve the copyright dispute.
See id. That settlement agreement provided, among other things, that the parties
waived “any and all claims either party now has or could ever have or become
entitled to, which might arise under the M anufacturing Agreement.” Id.
(quotations omitted). The settlement agreement also “include[d] a series of
provisions designed to reestablish a manufacturing relationship between Riley and
Anchor,” as well as a merger clause that indicated that the 1995 settlement
agreement “constitutes the entire agreement of the parties hereto and cancels,
terminates and supersedes any and all prior representations and agreements
relating to the subject matter thereof.” Id. at 778 (quotations omitted). This 1995
settlement agreement had no arbitration provision. See id.
Eight months after entering into the settlement agreement, Riley again
purportedly discovered that Anchor was selling sun tea jars with Riley’s
copyrighted designs. See id. This time, Riley sued Anchor, alleging, inter alia,
copyright and trade-secret claims. See id. In response, Anchor asserted that the
original manufacturing agreement required the parties to arbitrate this dispute.
See id. at 778-79. The district court disagreed and denied Anchor’s motion to
compel arbitration. See id. at 779.
On appeal, this court reversed. See id. at 785. In doing so, we concluded
that the merger clause in the later settlement agreement, which provided that the
29
settlement agreement “cancels, terminates and supersedes any and all prior
representations and agreements relating to the subject matter thereof,” id. at 778
(emphasis added), did “revoke[] the prior right of the parties to demand
arbitration” under the 1991 manufacturing agreement, but only as to the specific
subject matter of that later settlement agreement, id. at 784. The parties would
retain the right to arbitrate any dispute under the 1991 manufacturing agreement
that was not considered part of the subject matter of the later settlement
agreement. 2 1 See id.
Riley is clearly distinguishable from this case. First, while the original
agreement in Riley had expired by its own terms, the original 1994 licensing
agreement in this case between 1mage and Reynolds expressly continues in effect.
The parties do not dispute this. M oreover, although both the later agreement in
Riley and the 1996 agreement at issue in this case had merger provisions, those
provisions are completely different. In Riley, the parties’ merger provision
“cancels, terminates and supersedes any and all prior representations and
21
It is for this reason that this court remanded the action in Riley in order
for the district court to determine which of Riley’s claims arose under the subject
matter of the settlement agreement and thus were not eligible for arbitration. See
Riley, 157 F.3d at 783-85. Contrary to 1mage’s assertion, Riley does not require
the district court generally to determine the subject matter of the parties’
agreements in this case. Nor does Riley hold that a second agreement without an
arbitration provision automatically precludes arbitration of any dispute related to
that second agreement. Rather, arbitrability turns on the language of the
agreements involved and the parties’ intent in creating those agreements.
30
agreements relating to the subject matter thereof.” Id. at 778. The merger clause
in this case, on the other hand, specifically excepted 1mage’s and Reynolds’s
original 1994 contract: “[t]his Agreement is the exclusive statement of the entire
agreement between 1M AGE and [Reynolds] and supersedes all prior oral or
written representations or agreements between the parties, except the Software
Licensing Agreement dated M ay 4, 1994, betw een Information Solutions, Inc.,
1mage and [Reynolds], as the subject matter hereof.” (Emphasis added.) Riley,
then, does not support 1mage’s challenge to the district court’s decision to compel
arbitration in this case.
III. C O N C L U SIO N
For these reasons, we AFFIRM the district court’s decision.
31