Southern Industrial Contractors, LLC v. Neel-Schaffer, Inc.

          MEMORANDUM OPINION AND ORDER GRANTING THOMPSON ENGINEERING, INC.'S MOTION TO STAY

          LOUIS GUIROLA, JR. UNITED STATES DISTRICT JUDGE

         BEFORE THE COURT is the [211] Motion to Stay filed by the defendant Thompson Engineering, Inc., and joined by T.L. Wallace Construction, Inc., Neel-Schaffer, Inc., WG Yates & Sons Construction Company, Roy Anderson Corp., Yates-Anderson, JV, CH2M Hill, Inc., and Quality Engineering Services, Inc. The Motion has been fully briefed. After reviewing the submissions of the parties, the record in this matter, and the applicable law, the Court finds that this lawsuit should be stayed pending the appeal of the decision ordering arbitration in Southern Industrial Contractors, LLC v. Mississippi State Port Authority, cause number 251-16-681CIV, First Judicial District of Hinds County, Mississippi.

         BACKGROUND

         I. Federal Court Action

         The plaintiff Southern Industrial Contractors, LLC, served as the general contractor for the West Pier Facilities project at the Port of Gulfport, Mississippi. It filed this lawsuit against the project's owner, Mississippi Development Authority, as well as the project's consultants and engineers - Neel-Schaffer, Inc., CH2M, T.L. Wallace Construction, Inc., Thompson Engineering, Inc., W.G. Yates & Sons Construction Company, Roy Anderson Corp., Yates Anderson, JV, and Quality Engineering Services, Inc. (hereafter sometimes collectively referred to as “the Consultant Defendants”). Southern Industrial alleges that these defendants failed to provide notice of a large underground debris field at the project site. Southern Industrial claims that the Consultant Defendants directed it to excavate the debris, which made the project much more expensive and time-consuming. On November 30, 2017, the Court granted Mississippi Development Authority's Motion to Dismiss pursuant to the doctrine of sovereign immunity. All of the remaining defendants now ask this Court to stay this lawsuit pending the state court appeal of the decision ordering arbitration in Southern Industrial Contractors, LLC v. Mississippi State Port Authority, cause number 251-16-681CIV, First Judicial District of Hinds County, Mississippi.

         II. State Court Action

         On November 16, 2016, Southern Industrial filed a Complaint in the Circuit Court of Hinds County, Mississippi, against the Mississippi State Port Authority, asking the court to compel the Port Authority to submit to arbitration pursuant to the contract entered into by Southern Industrial and the Port Authority. In its state court Complaint, Southern Industrial alleges that the Port Authority was the owner of the West Pier Facilities project, and Southern Industrial served as the general contractor. The Complaint further alleges that Southern Industrial found a large underground debris field while trying to drive pilings for the project, and that the Port Authority directed Southern Industrial to excavate and remove some of the debris. Southern Industrial asserts that the Port Authority is liable:

for all losses sustained by [Southern Industrial] as a result of [the Port Authority's] breach of its contractual obligations, including without limitation, all amounts incurred by the Project being delayed and all amounts for additional time, effort, manpower, labor, machinery and money for which [Southern Industrial] has not been paid.

(State Court Compl. at 4, ECF No. 210-3). The Circuit Court granted Southern Industrial's Motion to Compel Arbitration, and the Port Authority appealed. The Port Authority filed its reply brief with the Mississippi Court of Appeals on June 20, DISCUSSION

         The defendants seek a stay pursuant to Section 3 of the Federal Arbitration Act (FAA), which provides:

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, providing the applicant for the stay is not in default in proceeding with such arbitration.

9 U.S.C.A. § 3. This statute generally only applies to the parties who signed the agreement containing the arbitration clause. Rainier DSC 1, L.L.C. v. Rainier Capital Mgmt., L.P., 828 F.3d 356, 360 (5th Cir. 2016). However, district courts have discretion “to stay litigation among the non-arbitrating parties pending the outcome of the arbitration.” Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 21 n. 23 (1983). The Fifth Circuit has held that claims among non-signatories can be stayed where: “(1) the arbitrated and litigated disputes involve the same operative facts; (2) the claims asserted in the arbitration and litigation are “inherently inseparable”; and (3) the litigation has a “critical impact” on the arbitration.” Id. (quoting Waste Mgmt., Inc., v. Residuos Industriales Multiquim, S.A. de C.V., 372 F.3d 339, 343 (5th Cir. 2016)). “The question is not ultimately one of weighing potential harm to the interests of the non-signatory, but of determining whether proceeding with litigation will destroy the signatories' right to a meaningful arbitration.” Waste Mgmt., Inc., 372 F.3d at 343.

         Southern Industrial first argues that the FAA does not govern, because it did not seek to compel arbitration pursuant to the FAA. However, the FAA governs arbitration provisions in contracts pertaining to interstate or foreign commerce. 9 U.S.C. §§ 1, 2. The United States Supreme Court has interpreted the word “involving commerce” in the FAA as broadly as the term “affecting commerce, ” which has been held to mean “a full exercise of constitutional power.” Allied-Bruce Terminix Cos., Inc. v. Dobson, 513 U.S. 265, 273-74 (1995). The project at issue in both this lawsuit and the state court lawsuit involves construction of an international port. The parties to the contract containing the arbitration provision - Mississippi Port Authority and Southern Industrial - are residents of Mississippi and Louisiana, respectively. Therefore, the contract containing the arbitration clause certainly “involved” or “affected commerce, ” and the FAA governs the arbitration clause.

         Southern Industrial next argues that the defendants are not entitled to a stay, because a final arbitration order has not been entered in state court. Southern Industrial claims that this Court would therefore have to determine whether Southern Industrial and the Port Authority entered into a binding arbitration agreement before this Court could impose a stay. However, the Circuit Court of Hinds County has in fact ordered the state court parties to proceed to arbitration, and the likelihood that the ...