Summit Packaging Systems, Inc. v. Kenyon & Kenyon

United States Court of Appeals
For the First Circuit

No. 01-1383

SUMMIT PACKAGING SYSTEMS, INC.,

Plaintiff, Appellee,

v.

KENYON & KENYON,

Defendant, Appellant.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NEW HAMPSHIRE

[Hon. Paul J. Barbadoro, U.S. District Judge]

Before

Boudin, Chief Judge,

Torruella, Circuit Judge,

and Stahl, Senior Circuit Judge.

Emily Gray Rice, with whom Orr & Reno, P.A. and Philip S. Bixby,
were on brief, for appellant.
Jack B. Middleton, with whom McLane, Graf, Raulerson & Middleton,
Professional Association and Scott H. Harris, were on brief, for
appellee.
December 3, 2001

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 TORRUELLA, Circuit Judge. Appellant Kenyon & Kenyon

("Kenyon") provided appellee Summit Packaging Systems, Inc. ("Summit")

legal representation in a patent infringement lawsuit. Dissatisfied

with the legal services it received, Summit brought suit against

Kenyon in New Hampshire Superior Court. After removing the case to

federal court, Kenyon filed a motion to stay the proceedings in favor

of arbitration. Kenyon argued that the case should be submitted to

arbitration pursuant to a written agreement between the parties. The

district court denied Kenyon's motion, finding the arbitration clause

to be permissive rather than mandatory. Because we conclude that the

arbitration clause is mandatory, we reverse.

BACKGROUND

In 1994, Summit retained Kenyon, an intellectual property law

firm, to represent it in a patent infringement lawsuit. A letter dated

April 28, 1994, signed by both parties, memorialized the terms of the

retainer agreement. The April 28 letter incorporated by reference the

terms of a 1991 retainer agreement between Summit and Kenyon. The 1991

retainer agreement contains an arbitration clause that states:

In the event any dispute arises between us
concerning our representation or payment of our
fees and disbursements which cannot be promptly
resolved to our mutual satisfaction, you agree
that the dispute will be submitted to
arbitration, and for that purpose referred to the
President of the Association of the Bar of the
City of New York . . . or to such Trustee or
other member of that Association as the President

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 any [sic] designate, as a tribunal for resolution
of the dispute (and decision of the tribunal
shall be final) or, if you prefer, submitted to
the Courts of the State of New York, on condition
that you promptly indicate your preference upon
request, and promptly appear therebefore.

Displeased with Kenyon's legal representation, Summit filed

suit in New Hampshire Superior Court alleging, inter alia, legal

malpractice and unfair billing practices. Kenyon successfully removed

the case to federal court and shortly thereafter filed for summary

judgment. Kenyon argued that all disputes regarding its representation

of Summit should be submitted to arbitration pursuant to the written

agreement between the parties. On December 28, 2000, the district

court denied Kenyon's motion for summary judgment and characterized the

arbitration clause as follows:

The clause [Kenyon] relies on permits but does
not require Summit to submit disputes concerning
Kenyon & Kenyon's representation of it to
arbitration. Further, although Kenyon & Kenyon
does not raise the issue, the language in the
clause authorizes Summit to file claims in the
New York state courts which permits, but does not
require Summit to bring suit in New York State
Court.

Summit Packaging Sys., Inc. v. Kenyon & Kenyon, No. 00-131, slip. op.

at 1 (D.N.H. Dec. 28, 2000).

On January 10, 2001, Kenyon filed a motion to reconsider the

trial court's summary judgment order or, in the alternative, for a stay

of the proceedings under the Federal Arbitration Act, 9 U.S.C. § 1 et

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seq. The court denied these combined motions. Summit, No. 00-131,

slip. op. at 1 (D.N.H. Jan. 31, 2001). Kenyon now appeals the district

court's denial of its motion to stay the proceedings in favor of

arbitration.

DISCUSSION

Pursuant to the Federal Arbitration Act ("FAA"), federal

appellate courts have jurisdiction to review a district court's denial

of a motion to stay proceedings in favor of arbitration. 9 U.S.C. §

16(a)(1)(A). As a condition precedent to exercising its jurisdiction

under § 16(a)(1)(A), the appeals court must find that the requirements

set forth in 9 U.S.C. § 3 have been met. Section 3 states, in relevant

part:

If 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 . . . .

9 U.S.C. § 3 (emphasis added).

Summit argues that this Court does not have jurisdiction over

Kenyon's appeal because the parties' issues are not "referable to

arbitration." Summit claims that the retainer agreement is entirely

permissive, allowing Summit to resolve its dispute with Kenyon through

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arbitration or litigation in any forum. Because the arbitration clause

does not constrain Summit's choice of forum whatsoever, the issues

cannot properly be "referable to arbitration" according to Summit.

In the alternative, Summit claims that if the retainer

agreement constrains its choice of forum - requiring Summit to choose

between arbitration and New York state court - arbitration is still not

mandatory. The arbitration clause remains permissive in the sense that

Summit continues to have a choice between arbitration and litigation in

New York state court. Summit, then, cannot be forced to arbitrate

against its will because the arbitration clause permits, but does not

require, arbitration. Summit thus concludes that under either reading

of the retainer agreement, the issues at stake are not "referable to

arbitration," thereby leaving this Court without jurisdictional

authority.

We agree with Summit that a party cannot be forced to

arbitrate when it has not agreed to do so. See, e.g., AT & T Techs.,

Inc. v. Communications Workers of Am., 475 U.S. 643, 648 (1986). We

further agree that a party cannot be forced to arbitrate against its

will if the arbitration clause permits, but does not require,

arbitration. Thus, the crucial underlying question in Summit's

jurisdictional challenge is whether the arbitration clause at issue is

mandatory or permissive. Interestingly, this is the same question that

is presented by the merits of the appeal. As the two questions are

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identical, resolution of Summit's jurisdictional challenge will

determine the outcome of Kenyon's appeal.

Summit's first argument is that the arbitration clause is

entirely permissive, allowing Summit to file suit in any forum it

desires. However, this position, which was also adopted by the

district court, is belied by the very language of the arbitration

clause. The plain language of the arbitration clause offers Summit

only two forums in the event of a dispute: arbitration or litigation in

New York state court. In the retainer contract, Summit agreed that any

dispute "will be submitted to arbitration . . . or . . . to the Courts

of the State of New York . . . ." (Appellant's Brief app. at 14)

(emphasis added). The language of the retainer agreement simply does

not allow for an interpretation that permits filing suit outside of New

York. The parties' choice of the word "will" - a word "commonly having

the mandatory sense of 'shall' or 'must,'" Black's Law Dictionary 1102

(6th ed. 1991) - demonstrates their exclusive commitment to the two

named forums. Most succinctly, the plain meaning of the phrase "will

be submitted" is that the course of action is required, not

discretionary.

To construe the phrase "will be submitted to arbitration .

. . or . . . to the Courts of the State of New York" to permit the

parties to choose any forum imaginable would be to render the phrase

"will be" meaningless. Since it is a basic principle of contract law

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that constructions that render contract terms meaningless should be

avoided, see, e.g., Systemized of New England, Inc. v. SCM, Inc., 732

F.2d 1030, 1034 (1st Cir. 1984) (applying the "familiar principle" that

every part of a contract should be given "meaning and effect"), we

interpret the arbitration clause to require Summit to choose one of the

two named forums.

In interpreting the arbitration clause to allow Summit to

file suit in any forum, the district court mistakenly relied on Dancart

Corp. v. St. Albans Rubber Co., 474 A.2d 1020 (N.H. 1984). In Dancart,

the court was presented with a forum selection clause in a commercial

contract that stated, "This Quotation and any contract as a result

thereof . . . shall be subject to the jurisdiction of the English

Courts." Id. at 1020. The court interpreted this clause as conferring

jurisdiction on English courts, but not limiting jurisdiction

exclusively to them. In reaching its conclusion, the Dancart court was

clear: "[T]he clause in question here is not a mandate to act, or to

refrain from acting. It is a grant of authority, and jurisdictional

authority is not necessarily exclusive jurisdictional authority." Id.

at 1022.

Unlike the contract in Dancart, the arbitration clause in the

instant case is both a provision for jurisdiction and venue. It

creates a "mandate to act" - that is, it requires the parties to

resolve their disputes through arbitration or litigation in New York.

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In contrast to jurisdictional authority, forum selection is necessarily

exclusive. In other words, when parties agree that they "will submit"

their dispute to a specified forum, they do so to the exclusion of all

other forums. See, e.g., Nascone v. Spudnuts, Inc., 735 F.2d 763, 765

(3d Cir. 1984) (holding that the language "venue for any proceeding .

. . shall be Salt Lake County, State of Utah," constituted a mandatory

forum selection clause); Milk 'N' More, Inc. v. Beavert, 963 F.2d 1342,

1345-46 (10th Cir. 1992) (holding that the language "venue shall be

proper under this agreement in Johnson County, Kansas" constituted a

mandatory forum selection clause).

Having determined that the arbitration clause requires Summit

to choose one of the named forums to resolve its dispute, we turn to

Summit's second argument. Summit argues that even if the retainer

agreement constrains its choice of forum, arbitration is still not

mandatory. The arbitration clause remains permissive in the sense that

Summit continues to have a choice between arbitration and litigation in

New York state court. Summit, then, cannot be forced to arbitrate

against its will, as the arbitration clause permits, but does not

require, arbitration. See AT & T Techs., 475 U.S. at 648 (noting that

"'a party cannot be required to submit to arbitration any dispute which

he has not agreed so to submit'") (quoting United Steelworkers of Am.

v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582 (1960)).

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 We disagree, however, with Summit's characterization of the

arbitration clause for two reasons. First, as a matter of logic, when

a person must choose between two options and decides to forego one of

them, then the second option necessarily becomes mandatory. This

simple syllogism describes the scenario that Summit has created for

itself. The retention agreement presented Summit with two options:

arbitration or litigation in New York state court. When Summit filed

this action in New Hampshire Superior Court, it decided to forego

bringing suit in New York. In so doing, arbitration became the

mandatory, and exclusive, forum for dispute resolution.

Furthermore, the cases that Summit cites for the proposition

that it cannot be forced to arbitrate are inapposite. Those cases

revolve around the question of whether the parties involved ever

intended to arbitrate certain issues in the first place. See AT & T

Techs., 475 U.S. at 649-50 (analyzing collective bargaining agreement

to determine what issues are covered by the arbitration clause); United

Steelworkers, 363 U.S. at 584 (same). There is no doubt in the instant

case that Summit agreed to resolve its disputes with Kenyon through

litigation in New York or arbitration; and when Summit abandoned the

former, the latter became mandatory.

Second, forcing Summit to arbitrate is consistent with the

spirit and intent of the FAA. The Supreme Court described the FAA's

purpose as "ensuring that private arbitration agreements are enforced

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according to their terms." Volt Info. Scis, Inc. v. Bd. of Trs. of

Leland Stanford Jr. Univ., 489 U.S. 468, 478 (1989). Arbitration thus

is "a matter of consent, not coercion, and parties are generally free

to structure their agreements as they see fit." Id. at 479. Summit

agreed to include in its arbitration clause two named forums for

dispute resolution, and it decided to forego the New York litigation

alternative. Consistent with its own agreement, and in furtherance of

the FAA's purpose, Summit must now submit to the only option that

remains under the contract it negotiated - arbitration.

CONCLUSION

Because Summit is required under the agreement with Kenyon

to arbitrate its claims (unless Summit resorted to New York courts--

which it failed to do), we conclude that this Court has jurisdiction

over the appeal under 9 U.S.C. § 16(a)(1)(A) and that the district

court erred in characterizing the arbitration clause as permissive. We

reverse the district court's decision to deny Kenyon's motion to stay

the proceedings in favor of arbitration and remand the matter for

action consistent with these proceedings.

Costs assessed against appellee.

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