Security Watch, Inc. v. Sentinel Sys.

Security Watch, Inc. v. Sentinel Sys.

Opinion

 [***2]   [*370]  OPINION 

KAREN NELSON MOORE, Circuit Judge. Plaintiff-Appellant Security Watch, Inc. ("Security"), a dealer in security systems, brought this action in the Western District of Tennessee against Defendant-Appellee Sentinel Systems, Inc. ("Sentinel"), its distributor, and Defendant-Appellee American Telephone and Telegraph Company ("AT&T"),  [**2]  the manufacturer of the systems. Holding that the Tennessee forum was precluded under the pertinent dealer contracts, the district court dismissed the action. We AFFIRM IN PART and REVERSE IN PART. We conclude that the district court correctly held that a forum-selection provision of the agreements precluded the prosecution of the action in Tennessee against Sentinel, which was a party to the contracts with Security. We hold that the district court erred, however, in concluding that a dispute-resolution provision first included in the parties' 1994 contract was applicable to disputes arising under earlier contracts and precluded the prosecution in Tennessee of all claims against both defendants. Thus, Security will be permitted to proceed against AT&T in the Western District of Tennessee on its pre-1994 claims.

 [***3] I. FACTS AND PROCEDURAL HISTORY

This commercial dispute involves several parties and several contracts. From at least 1988 through 1994 Security served as a dealer of security systems distributed by Sentinel and manufactured by AT&T. Annual agreements between Security and Sentinel governed the business relationship. AT&T was not a party to these [**3]  agreements. The 1993 Agreement (and earlier contracts) included a forum-selection provision that confined litigation "involving, arising under, or interpreting" the agreements to certain state or federal courts located in Virginia (the "Forum-Selection Clause"). Joint Appendix ("J.A.") at 52-53 (1993 Agreement P 14). In addition to the Forum-Selection Clause, the 1994 Agreement contained an alternative dispute-resolution provision that required negotiation, mediation, and, in some circumstances, arbitration of disputes (the "ADR Clause").

In 1996 Security sued the defendants in the Western District of Tennessee alleging, inter alia, breach of express and implied warranties. ¹ Security alleged that certain products purchased under the dealer contracts were defective. The defendants moved to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b). The district court granted the motion on two grounds. First, the court held that Security was barred from proceeding against Sentinel in Tennessee by the Forum-Selection Clause of the agreements. Second, the court held that the ADR Clause of the 1994 Agreement was applicable to 1994 and pre-1994 claims against both defendants [**4]  and also precluded litigation in Tennessee. Security filed a timely notice of appeal. This court's jurisdiction  [*371]  over the appeal is a matter of dispute that we will address before proceeding to the merits.  [***4]  

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