Law School Case Brief
Textile Unlimited v. A..bmhand Co. - 240 F.3d 781 (9th Cir. 2001)
Arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit. The Federal Arbitration Act's, 9 U.S.C.S. § 1 et seq., venue provisions are discretionary, not mandatory. On its face, it provides that venue is proper for an action to compel arbitration in any United States district court which, save for such agreement, would have jurisdiction under Title 28 of the United States Code. It only confines the arbitration to the district in which the petition to compel is filed. It does not require that the petition be filed where the contract specified that arbitration should occur.
Plaintiff Textile Unlimited, Inc. (Textile) bought yarn goods from defendant A..BMH and Company, Inc. (A..BMH) over the course of 10 months in 38 transactions. Each transaction followed a similar pattern. Textile would send a purchase order to a broker in California, A..BMH would respond with an invoice, followed by shipment of the yarn and an order acknowledgment. Both the invoice and the order acknowledgment contained a twist: additional terms tucked into the back of the invoice and the face of the acknowledgment, terms that had not adorned Textile's purchase order but stated, inter alia, that acceptance of the yarn delivery constituted acceptance of all of the Sales Terms, including a clause that states that all disputes arising in connection with their transactions shall be settled in Atlanta, Georgia by binding arbitration conducted under the Commercial Arbitration Rules of the American Arbitration Association.Later, Textile refused to pay, alleging that the yarn was defective. Defendant then submitted the matter to arbitration in Georgia. Textile did not object to the arbitration within the time provided. Textile filed an action in the United States District Court for the Central District of California to enjoin the arbitration. Textile claims that A…BMH is, in the parlance of the industry, "spinning a yarn" by contending that the two companies had agreed to settle contract disputes by binding arbitration in Georgia. A..BMH counters that Textile is warping the facts. The district court enjoined both the pending arbitration and defendant from any further action regarding the arbitration.
Does the venue for an action to compel arbitration need to be filed where a contract specific such arbitration should occur?
The Court of Appeals for the Ninth Circuit concluded that the district court correctly found that venue was proper in the district court under 28 U.S.C.S. § 1391. Contrary to defendant's arguments, nothing in the Federal Arbitration Act, 9 U.S.C.S. § 1 et seq., required that plaintiff's action to enjoin arbitration be brought in the district where the contract designated the arbitration to occur. The district court did not abuse its discretion in granting the preliminary injunction. The district court found that plaintiff would have suffered irreparable harm if the arbitration were not stayed, that the balance of hardships tipped in plaintiff's favor and that it was in the public interest to stay arbitration. Serious questions were raised and plaintiff had shown a probability of success on the merits. The supplemental terms to the contract proposed by defendant, including the arbitration clause, did not become part of the contract. Finally, plaintiff did not waive its objection to arbitration by failing to object within the time period specified in the arbitration rules.
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