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W & T Travel Services LLC v. Priority One Services, Inc.

United States District Court, D. Columbia.

September 25, 2014


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[Copyrighted Material Omitted]

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For PRIORITY ONE SERVICES, INC., Defendant: Michael Joseph Klisch, LEAD ATTORNEY, COOLEY, LLP, Washington, DC.

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BERYL A. HOWELL, United States District Judge.

The plaintiff, W& T Travel Services, LLC, a Maryland company, which provides transportation services to the federal government and commercial companies, filed this action against the defendant, Priority One Services, Inc., a Virginia company, which also provides such services, to bar a second arbitration of a contract dispute that persists between the parties. See Compl., ECF No. 1. Pending before the Court is the plaintiff's Motion For Stay of Arbitration Proceeding (" Pl.'s MTS" ), ECF No. 7, and the defendant's Motion to Dismiss the Complaint or, in the alternative, to Stay and Compel Arbitration (" Def.'s MTD/Stay" ), ECF No. 10. For the foregoing reasons, the plaintiff's motion to stay the arbitration is denied and the defendant's motion to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6) is granted.[1]


The plaintiff filed this action to enjoin a second arbitration of a contract dispute between the parties " because such action arises under the same facts, agreement, and transaction as the first arbitration." Compl. ¶ 1. The facts underlying the contract dispute prompting both arbitrations are summarized in a prior opinion by this Court. See Priority One Servs., Inc. v. W & T Travel Servs., LLC, 825 F.Supp.2d 43, 45 (D.D.C. 2011). In brief, on August 20, 2008, the National Institutes of Health (" NIH" ) awarded the plaintiff a contract (" the Prime Contract" ) to operate shuttle buses for NIH employees and patients. Id. The Prime Contract provided for one base year of service (2008-2009), and was renewable by NIH for four additional one-year terms (2009-2010; 2010-2011; 2011-2012;

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and 2012-2013). See Compl., Ex. 1 (" Demand for Arbitration" ) ¶ 13, ECF 1-1. Over the five years of the Prime Contract, including the four option years, the contract was valued at approximately $34 million. Priority One Servs., Inc., 825 F.Supp.2d at 45.

One week after award of the Prime Contract, the plaintiff entered a subcontract with the defendant for the defendant to manage the NIH patient shuttle bus services while the plaintiff retained responsibility for managing the NIH employee shuttle buses. See Subcontract Agreement (" Subcontract" ), ECF No. 1-1, at 1. Similar to the terms in the Prime Contract, the Subcontract was for one year but would " automatically extend consistent with [NIH's] exercise of [the] four one-year option periods under the Prime Contract." Id. at 2. In addition, the Subcontract contained an arbitration clause stating that:

12. All claims, disputes and matters in question arising out of, or relating to, this Subcontract Agreement or the breach thereof, except for claims for which the Client is liable (which will be adjudicated in accordance with the prime contract's Dispute clause), shall be decided by arbitration in accordance with the rules of the American Arbitration Association then in effect unless the parties mutually agree otherwise. This agreement to arbitrate shall be specifically enforceable under the prevailing arbitration law. The location of the arbitration proceedings shall be Washington, DC.

Subcontract ¶ 12.

In 2009, after NIH exercised the first option year on the Prime Contract, the plaintiff terminated the Subcontract with the defendant. See Demand for Arbitration ¶ ¶ 19-23. On December 15, 2009, the defendant filed a demand for arbitration with the American Arbitration Association (" AAA" ), arguing that the plaintiff's termination of the Subcontract was a material breach of the parties' agreement. See id¶ 25. Almost ten months later, on October 18, 2010, the arbitration panel issued its ruling agreeing with the defendant that the plaintiff's termination of the defendant " was unjustified" and awarding the defendant damages for the amount of lost profits for Option Years 1 and 2 in the amount of $1,135,020.00, plus interest, costs and expenses (" 2010 Arbitration Award" ). Compl. ¶ 7; Demand for Arbitration, ¶ ¶ 29, 32; see Priority One Servs., Inc., 825 F.Supp.2d at 48. The 2010 Arbitration Award compensated the defendant for damages incurred for the first two option years of the Subcontract, since, by the time of the arbitration ruling, NIH had exercised the options for those two years under the Prime Contract, and that exercise would have automatically extended the Subcontract, absent the plaintiff's material breach of the Subcontract. See Demand for Arbitration ¶ ¶ 31-32. The arbitration panel did not award the defendant damages for the third and fourth option years because " the AAA found that [the defendant's] claims for those damages had not yet fully accrued because NIH had not yet exercised those option years." Id. ¶ 33.

The defendant then petitioned for judicial confirmation of the arbitration award, which the plaintiff opposed. Priority One Servs., Inc., 825 F.Supp.2d at 48. This Court confirmed the arbitration panel's decision to award the defendant damages that flowed from the plaintiff's wrongful termination of the parties' Subcontract, see id. at 57, and that decision was affirmed by the Circuit, Priority One Servs., Inc. v. W & T Travel Servs., LLC, 502 F.App'x 4, 6 (D.C. Cir. 2013).

NIH thereafter exercised option years 3 and 4 in 2011 and 2012, respectively, under

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the Prime Contract. See Demand for Arbitration at ¶ ¶ 36, 38. Towards the end of the Prime Contract, the plaintiff and the defendant competed for the NIH shuttle bus contract and, in July 2013, the plaintiff was again awarded the prime contract (" 2013 Prime Contract" ). Id. ¶ ¶ 41-43. On October 9, 2013, the defendant brought a second demand for arbitration for lost profits accruing from option years 3 and 4 under the Prime Contract and Subcontract, as well as lost profits under the 2013 Prime Contract, since the Subcontract provided for automatic extension of its term for any option years under the Prime Contract " along with any further extension or re-competition of the [2008] Prime Contract." Id. ¶ ¶ 36-40. Two days later, the plaintiff filed this action seeking to enjoin the defendant " from proceeding with a second demand for arbitration." Compl. ¶ 1.

As set out in the Complaint, the plaintiff seeks to stop the second arbitration, requesting a declaratory judgment, pursuant to 28 U.S.C. § 2201, that this Court's confirmation of the 2010 Arbitration Award is " the final determination of the issues related to the Subcontract" and bars any re-litigation of issues arising under the Subcontract. Compl. ¶ 2. The plaintiff supports this request with allegations set out in five counts, namely: that no arbitration is authorized because the Subcontract no longer exists or applies, id. ¶ 22 (" Count I" ); that the defendant's right to recover damages for option years 3 and 4 was already litigated in the first arbitration and, therefore, the second arbitration is barred under the doctrines of collateral estoppel, id. ¶ ¶ 25-26 (" Count II" ), and res judicata, id. ¶ ¶ 29-31 (" Count III" ); that the defendant waived the claims asserted in the second arbitration " by not making any efforts to preserve them," id. ¶ 33 (" Count IV" ); and, finally, that the second arbitration demand is " frivolous" and " constitutes harassment of [plaintiff]," id. ¶ ¶ 37-38 (" Count V" ), for which the " Plaintiff reserves the right to seek other monetary damages, depending on the findings of this Court," id ¶ 40.

On November 7, 2013, the AAA determined that " in the absence of an agreement by the parties or a court order staying this matter, [it would] proceed with the administration of the arbitration." Joint Status Report, Ex. 1 (AAA Letter, dated November 7, 2013) at 3, ECF No. 18-1. Following solicitation of briefing from the parties on the threshold issue of arbitrability of the second arbitration demand, the arbitration panel determined, on July 21, 2014, that it has jurisdiction to arbitrate the merits of the claims raised in the demand " as well as scrutinize the defenses to those claims, even if the [plaintiff] decides not to participate in the arbitration." Joint Status Report, Ex. 1 (AAA Panel " Decision on Jurisdiction" ) at ¶ ¶ 17-18, ECF No. 20-1.

The Court now turns to the pending motions by the plaintiff to stay the arbitration and by the defendant to dismiss the Complaint or, alternatively, stay the case and compel arbitration.


A. Motion to Compel or Stay Arbitration

A motion to compel arbitration, pursuant to the Federal Arbitration Act (" FAA" ), 9 U.S.C. § 4, is treated " as if it were a request for summary disposition of the issue of whether or not there had been a meeting of the minds on the agreement to arbitrate" and, therefore, is subject to the summary judgment standard of Federal Rule of Civil Procedure 56(c). Aliron Int'l, Inc. v. Cherokee Nation Indus., 531 F.3d 863, 865, 382 U.S.App.D.C. 134 (D.C. Cir. ...

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