United States District Court, District of Columbia
ROSEMARY M. COLLYER UNITED STATES DISTRICT JUDGE
Seibert seeks a stay of arbitration demanded by Precision
Contracting Solutions, LP and its sole owner and partner,
Derrick Sieber, arising out of a construction contract
dispute. Defendants both oppose the stay and move to dismiss
for lack of subject-matter jurisdiction. Defendant Precision
Contracting Solutions, LP also moves to dismiss for lack of
personal jurisdiction due to insufficient service. Under the
Federal Arbitration Act, the Court's authority is
distinctly limited. Here, however, Mr. Seibert alleges that
the arbitration clause in the construction contract contains
illegal and unconscionable terms that render it
unenforceable. In such a case, the saving clause of the
Federal Arbitration Act “allows courts to refuse to
enforce arbitration agreements.” Epic Sys. Corp. v.
Lewis, 138 S.Ct. 1612, 1622 (2018). Because the Court finds
that service was made and the arbitration clause is
unconscionable and unenforceable, it will enter a stay of the
arbitration and any award and will deny Defendants'
motions to dismiss.
Seibert and Precision Contracting Solutions, LP (PCS), signed
a contract on December 8, 2017, by which PCS agreed to make
certain upgrades to Mr. Seibert's residential property in
Washington, D.C. Compl. [Dkt. 1] ¶ 6; see also Ex. 1,
Compl., Precision Construction Contract (Contract) [Dkt.
1-1]. Mr. Seibert paid for most of the work but refused to
make the last payment because the work was allegedly shoddy,
incomplete, and performed without the necessary permits. See
Compl. ¶¶ 11-15. PCS initiated arbitration to
collect the unpaid balance of the Contract under the
Binding Arbitration: The parties to this contract
agree that any and all disputes that cannot be settled in
good faith by the parties shall be resolved through binding
arbitration that is initiated under the Construction Industry
Arbitration Rules of the American Arbitration Association
(“AAA”) within 30 days of such dispute. No. legal
action may be initiated before the AAA or in any other
arbitral or judicial forum against any director, officer,
employee or agent of, or anyone else associated with, one of
the principals to this contract in connection with any
dispute related to this contract. The party's [sic] sole
recourse under this contract shall be against each other
before the AAA. If the parties do not file a claim with the
AAA within the 30-day period stated herein, then all claims
are barred from being brought by the parties in any and all
legal forums. It is further agreed that the cost of binding
arbitration shall be shared equally by PCS and the Client. It
shall be clearly understood that any disputes that may arise
are confidential with no public comment permitted in any form
by either party relating to the dispute. The results of any
Arbitration proceeding shall also be confidential with no
public comment by either party permitted in any form relating
to any award. The parties agree that any breach of this
provision shall constitute a willful breach of contract.
at 3. The Contract was signed by Derrick S. Sieber,
“Owner, Precision Contracting Solutions, ” and
Mr. Seibert. See Id. at 4.
Seibert sued PCS, Derrick Sieber, and Stephen
Sieber on April 10, 2018, seeking a declaratory
judgment that the arbitration clause is unenforceable and
raising claims of fraud in the inducement, reformation,
breach of contract, and unlawful trade practices. See Compl.
¶¶ 17-43. Mr. Seibert moved to stay the arbitration
initiated by PCS on the same day. Mot. to Stay Arbitration
[Dkt. 2]; Mem. of P. & A. in Supp. of Mot. to Stay
Arbitration (Stay Mem.) [Dkt. 2-1]. Defendants oppose.
Opp'n of Defs. to Pl.'s Mot. to Stay [Dkt. 34].
procedural motions have been filed. The Clerk of Court
entered default against PCS after Mr. Seibert filed a motion
alleging that PCS had been served and failed timely to answer
or otherwise respond. See Mot. for Entry of Default as to PCS
[Dkt. 8]; Clerk's Entry of Default as to PCS [Dkt. 9].
PCS moves to vacate the Clerk's entry of default and
argues it had not been properly served. Mot. to Vacate
Clerk's Entry of Default [Dkt. 11]. That motion is
both Defendants separately moved to dismiss for lack of
subject-matter jurisdiction. Mot. of Def. Derrick S. Sieber
to Dismiss or Stay this Proceeding for Lack of Subject-Matter
Jurisdiction (D. Sieber MTD) [Dkt. 14]; Mot. of Def. PCS to
Dismiss this Proceeding for Lack of Subject-Matter
Jurisdiction (PCS MTD) [Dkt. 24]. Both motions are ripe for
Federal Arbitration Act
Federal Arbitration Act (FAA), 9 U.S.C. § 1 et seq.,
states the direction of Congress that “federal courts
[are] to enforce arbitration agreements according to their
terms . . . .” Epic Sys., 138 S.Ct. at 1619. Section 2
of the FAA makes arbitration agreements “valid,
irrevocable, and enforceable.” 9 U.S.C. § 2.
Section 2 also provides a “saving clause [that] allows
courts to refuse to enforce arbitration agreements
‘upon such grounds as exist at law or in equity for the
revocation of any contract.'” Epic Sys., 138 S.Ct.
at 1622 (quoting 9 U.S.C. § 2). The saving clause
“permits agreements to arbitrate to be invalidated by
generally applicable contract defenses, such as fraud,
duress, or unconscionability.” Id. (quoting
AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339
saving clause of Section 2 of the FAA has been given a
limited reading by the Supreme Court.
[I]f the claim is fraud in the inducement of the arbitration
clause itself-an issue which goes to the ‘making'
of the agreement to arbitrate-the federal court may proceed
to adjudicate it. But the statutory language does not permit
the federal court to consider claims of fraud in the
inducement of the contract generally. . . . We hold,
therefore, that in passing upon [an FAA] § 3 application
for a stay [of litigation] while the parties arbitrate, a
federal court may consider only issues relating to the making
and performance of the agreement to arbitrate.
Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S.
395, 403-04 (1967); see also Kindred Nursing Ctrs. Ltd.
P'ship v. Clark, 137 S.Ct. 1421, 1426 (2017) (“A
court may invalidate an arbitration agreement based on
‘generally applicable contract defenses' like fraud
or unconscionability, but not on legal rules that
‘apply only to arbitration or that derive their meaning
from the fact that an agreement to arbitrate is at
issue.'”) (quoting Concepcion, 563 U.S. at 339).
they direct the Court's analysis, the relevant sections
of the FAA are quoted in full below:
§ 2: A written provision in . . . a contract evidencing
a transaction involving commerce to settle by arbitration a
controversy thereafter arising out of such contract or
transaction . . . shall be valid, irrevocable, and
enforceable, save upon such grounds as exist at law or in
equity for the revocation of any contract.
§ 3: 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 .
. . .
§ 4: A party aggrieved by the alleged failure, neglect,
or refusal of another to arbitrate under a written agreement
for arbitration may petition . . . for an order directing
that such arbitration proceed in the 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 . . . . 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. If no jury trial be demanded
by the party alleged to be in default, . . . the court shall
hear and determine such issue.
§ 9: . . . If no court is specified in the agreement of
the parties [to confirm an award], then such application may
be made to the United States court in and for the district
within which such award was made. . . .
(a) An appeal may be taken from - (1) An order -
(A) refusing a stay of any action under section 3 of this
(B) denying a petition under section 4 of this title to order
arbitration to proceed,
(C) denying an application under section 206 of this title to
(D) confirming or denying confirmation of an award or partial