Revised August 9, 2001
UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 00-20964
Summary Calendar
OPE INTERNATIONAL LP,
Plaintiff-Appellee,
VERSUS
CHET MORRISON CONTRACTORS, INCORPORATED,
Defendant-Appellant.
Appeal from the United States District Court
for the Southern District of Texas
August 1, 2001
Before EMILIO M. GARZA, STEWART, and PARKER, Circuit Judges.
PER CURIAM:
Appellant Chet Morrison Contractors argues that the district
court erred by compelling arbitration pursuant to an arbitration
agreement with OPE International. Appellant claims that section
9:2779 of the Louisiana Revised Statutes nullifies the terms of the
parties’ agreement that require the parties to submit to
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arbitration in Texas and to resolve their dispute under Texas law.
See LA. REV. STAT. ANN. § 9:2779. We must determine whether the
Federal Arbitration Act preempts the Louisiana statute.
I.
On January 23, 1998, OPE International (“OPE”), a Texas
limited partnership with its principal place of business in
Houston, Texas, and Chet Morrison Contractors (“CMC”), a Louisiana
corporation with its principal place of business in Houma,
Louisiana, entered into a subcontract for CMC to fabricate a deck
structure for OPE to use in extracting hydrocarbons in the Gulf of
Mexico. The subcontract contained an arbitration clause selecting
a Houston forum.1 The subcontract also contained (1) a choice-of-
law provision requiring the application of Texas law,2 (2) a
stipulation that portions of the subcontract work were to be
1
Clause 21.2 states in pertinent part:
...if any question, dispute or difference shall arise between
CONTRACTOR and SUBCONTRACTOR, and the parties cannot mutually
agree on a resolution thereof, then the Parties agree that
such question, dispute or difference shall be finally settled
by arbitration in Houston, Texas, or in such other location as
may be mutually agreed, in accordance with the Construction
Industry Rule of the American Arbitration Association with a
single arbitrator.
2
Clause 23.5 states:
ALL MATTERS RELATING TO THE VALIDITY, PERFORMANCE OR
INTERPRETATION OF THIS SUBCONTRACT SHALL BE GOVERNED BY THE
RELEVANT PROVISIONS OF THE MAIN CONTRACT OR, IN THE ABSENCE OF
ANY PROVISIONS IN THE MAIN CONTRACT, BY THE LAW OF THE STATE
OF TEXAS, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF
LAWS.
2
performed outside of Louisiana, and (3) a waiver of CMC’s right to
remedies pursuant to Louisiana Revised Statute section 9:2779.3
Disagreements arose between OPE and CMC. On July 20, 1998,
OPE filed a Demand for Arbitration with the Houston office of the
American Arbitration Association. After the second day of
arbitration, OPE and CMC agreed to temporarily suspend the
proceedings and attempt settlement through mediation. Mediation
proved unsuccessful. OPE notified CMC that it wished to resume
arbitration proceedings, but CMC refused. On February 18, 2000,
CMC filed suit in the 32nd Judicial District Court for the Parish
of Terrebonne, Louisiana, seeking damages and a declaration that
the subcontract’s arbitration clause and choice-of-law provision
violated public policy and were void.
OPE responded by filing a petition in the Southern District of
Texas to compel arbitration. The district court granted OPE’s
motion on September 29, 2000. The district court ordered CMC to
submit to arbitration in Houston, Texas and ordered that the
pending Louisiana suit be stayed. The district court determined
that the Federal Arbitration Act (“FAA”), 9 U.S.C. § 4, preempts
section 9:2779 of the Louisiana Revised Statues to the extent that
the Louisiana statute prohibits the parties from enforcing out-of-
3
Clause 23.13 states: “The Parties stipulate and agree that the
portions of the Subcontract Work shall be performed outside of
Louisiana and that Subcontract Work is in interstate commerce and,
therefore, SUBCONTRACTOR specifically waives all redress to and
rights and remedies under Louisiana Revised Statutes Section
9:2779.”
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state choice-of-venue provisions. The court ordered CMC to submit
to arbitration in Houston under the terms of the agreement. CMC
timely appealed.
II.
This court reviews a district court's grant of a motion to
compel arbitration de novo. Local 1351 Int’l Longshoremen’s Ass’n.
v. Sea-Land Serv., Inc., 214 F.3d 566, 569 (5th Cir. 2000), cert.
denied, 121 S. Ct. 771 (2001). The FAA "establishes that, as a
matter of federal law, any doubts concerning the scope of
arbitrable issues should be resolved in favor of arbitration,
whether the problem at hand is the construction of the contract
language itself or an allegation of waiver, delay, or a like
defense to arbitrability." Moses H. Cone Mem’l Hosp. v. Mercury
Constr. Corp., 460 U.S. 1, 24-25 (1983).
Courts conduct a two-step inquiry when deciding whether
parties must submit to arbitration. See Webb v. Investacorp, Inc.,
89 F.3d 252, 257-58 (5th Cir. 1996). The first step is to decide
whether the parties agreed to arbitrate their dispute. See id. at
258. “This determination involves two considerations: (1) whether
there is a valid agreement to arbitrate between the parties; and
(2) whether the dispute in question falls within the scope of that
arbitration agreement.” Id. To resolve these issues, "courts
generally . . . should apply ordinary state-law principles that
govern the formation of contracts." Id. (quoting First Options of
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Chicago, Inc. v. Kaplan, 514 U.S. 938, 944, 115 S.Ct. 1920, 1924
(1995)). Once a court determines that the parties agreed to
arbitrate, the court must assess "'whether legal constraints
external to the parties' agreement foreclosed the arbitration of
those claims.'" Id. (quoting Mitsubishi Motors Corp. v. Soler
Chrysler-Plymouth, Inc., 473 U.S. 614, 628 (1985)).
Both parties agree that the first step of the above inquiry is
met. CMC relies on the second step of the inquiry to argue that
the arbitration agreement is foreclosed by Louisiana statute.
Section 9:2779 of the Louisiana Revised Statutes states in relevant
part:
A. The legislature finds that, with respect to
construction contracts, subcontracts, and purchase orders
for public and private works projects, when one of the
parties is domiciled in Louisiana, and the work to be
done and the equipment and materials to be supplied
involve construction projects in this state, provisions
in such agreements requiring disputes arising thereunder
to be resolved in a forum outside of this state or
requiring their interpretation to be governed by the laws
of another jurisdiction are inequitable and against the
public policy of this state.
B. The legislature hereby declares null and void and
unenforceable as against public policy any provision in
a contract, subcontract, or purchase order, as described
in Subsection A, which either:
(1) Requires a suit or arbitration proceeding
to be brought in a forum or jurisdiction
outside of this state; rather, such actions or
proceedings may be pursued in accordance with
the Louisiana Code of Civil Procedure or other
laws of this state governing similar actions.
LA. REV. STAT. ANN. § 9:2779.
The FAA declares written provisions for arbitration “valid,
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irrevocable, and enforceable, save upon such grounds as exist at
law or in equity for the revocation of any contract.” 9 U.S.C.
§ 2. “In enacting § 2 of the [FAA], Congress declared a national
policy favoring arbitration and withdrew the power of the states to
require a judicial forum for the resolution of claims which the
contracting parties agreed to resolve by arbitration.” Southland
Corp. v. Keating, 465 U.S. 1, 10 (1984); see also Moses, 460 U.S.
at 24 (“Section 2 is a congressional declaration of a liberal
federal policy favoring arbitration agreements, notwithstanding any
state substantive or procedural policies to the contrary.”).
In Southland, franchisees filed suit in California state court
alleging violations of the California Franchise Investment Law.
See 465 U.S. at 4 (citing CAL. CORP. CODE ANN. § 3100 et seq. (West
1977)). Southland petitioned to compel arbitration pursuant to an
arbitration clause in the franchise agreement. Id. The California
Supreme Court held that the Franchise Investment Law required
judicial consideration of claims brought under the statute. Id. at
5. The Supreme Court reversed, holding that the statute was
preempted by the FAA. See id. at 16. The Court explained that
“[i]n creating a substantive rule applicable in state as well as
federal courts, Congress intended to foreclose state legislative
attempts to undercut the enforceability of arbitration agreements.”
Id. at 16 (footnotes omitted).
In Doctor’s Associates, Inc. v. Casarotto, 517 U.S. 681, 687-
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89 (1996), the Court held that the FAA preempted a Montana statute
which rendered arbitration clauses unenforceable unless “‘typed in
underlined capital letters on the first page of the contract.’” Id.
at 684. (quoting MONT. CODE ANN. § 27-5-114(4)(1995)). The court
stated that
[b]y enacting § 2 [of the FAA], we have several times
said, Congress precluded States from singling out
arbitration provisions for suspect status, requiring
instead that such provisions be placed “upon the same
footing as other contracts.” Montana’s [statute]
directly conflicts with § 2 of the FAA because the
State’s law conditions the enforceability of arbitration
agreements on compliance with a special notice
requirement not applicable to contracts generally. The
FAA thus displaces the Montana statute with respect to
arbitration agreements covered by the Act.
Id. at 687 (citations omitted); see also Perry v. Thomas, 482 U.S.
483, 492, n.9 (1987)(“A state-law principle that takes its meaning
precisely from the fact that a contract to arbitrate is at issue
does not comport with this requirement of § 2.”).
Although the Fifth Circuit has never determined whether the
FAA preempts section 9:2779, we have held that the FAA preempts
other state laws that preclude parties from enforcing arbitration
agreements. In Commerce Park v. Mardian Construction Co., 729 F.2d
334, 337 (5th Cir. 1984), we held that the FAA preempted provisions
in the Texas Deceptive Trade Practices Act (“DTPA”) that required
parties to submit to a judicial forum. The DTPA stated that “[a]ny
waiver by a consumer of the provisions of this subchapter is
contrary to public policy and is unenforceable and void . . ..”
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TEX. BUS. & COM. CODE ANN. §§ 17.42 & 17.59 (Vernon Supp. 1982).
Commerce Park argued that the DTPA prohibited litigants from
resolving their claims under the statute through arbitration. We
rejected Commerce Park’s argument and concluded that if the DTPA
provisions were given effect, the statute would abrogate § 2 of the
FAA in violation of the supremacy clause. See id. at 338; see also
Ommani v. Doctor’s Assocs., Inc., 789 F.2d 298, 299-300 (5th Cir.
1986)(“[T]o the extent that [the DTPA] provides a remedy parallel
to and often overlapping claims that may fall within the scope of
the Federal Arbitration Act, we find the Southland decision clearly
apposite.”)
In Miller v. Public Storage Management, Inc., 121 F.3d 215,
217, 219 (5th Cir. 1997), the plaintiff’s employer terminated the
plaintiff for failing to return to work eight months after an on-
the-job injury. The plaintiff argued that she should not have been
compelled to arbitrate her state claims for retaliation under the
Texas Labor Code because Texas law does not favor arbitration for
personal-injury or workers’ compensation claims. Applying
Southland, we held that the FAA preempts conflicting state anti-
arbitration laws. Id. at 219.
Section 9:2779 declares “null and void and unenforceable as
against public policy any provision in [certain construction
subcontracts] . . . which [] [r]equires a suit or arbitration
proceeding to be brought in a forum or jurisdiction outside of
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[Louisiana].” LA. REV. STAT. ANN. 9:2779(B)(1). The statute
directly conflicts with § 2 of the FAA because the Louisiana
statute conditions the enforceability of arbitration agreements on
selection of a Louisiana forum; a requirement not applicable to
contracts generally. See Doctor’s Assocs., 517 U.S. at 687. The
FAA therefore preempts the Louisiana statute, which prohibits the
arbitration agreement between CMC and OPE. Accordingly, we
conclude that the district court properly compelled the parties to
submit to arbitration.4
AFFIRMED
4
We find CMC’s remaining choice of law arguments without merit.
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