Cortez Byrd Chips, Inc. v. Bill Harbert Construction Co. (03/21/2000)

By: Linda Chung, Medill News Service

Questions presented

Whether a suit to vacate an arbitration award may be brought in the district in which the events in the underlying dispute occurred.

Brief

On Oct. 16, 1995, Cortez Byrd Chips, Inc. hired Bill Harbert Construction Co. to install a prefabricated chip mill in Brookhaven, Miss.

Under a signed contract, Cortez Byrd Chips agreed to pay the Alabama-based construction company $1,357,000 for installing the mill within 30 weeks. According to the contract, any additions, deletions or modifications to the project required a written statement from either party.

The contract also said that any disputes between the parties ""shall be decided by arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association currently in effect.""

After the mill was installed, Harbert Construction demanded an upward adjustment to the original amount.

Byrd Chips refused, claiming that Harbert Construction hadnt submitted a written statement requesting for additional compensation, which was required under the contract.

The American Arbitration Association was called upon by Harbert Construction to resolve matters. The association assigned the arbitration proceedings to Birmingham, Ala., where the construction company is located.

On Dec. 19, 1997, the arbitration panel awarded in favor of Harbert Construction, granting them the requested adjustment of $488,500.

In response, Byrd Chips filed suit in the U.S. District Court for the Southern District of Mississippi to annul the award. A week later, Harbert Construction filed to confirm the award in the U.S. District Court for the Northern District of Alabama. Each party filed suit in their own districts.

Byrd Chips requested that the case be dismissed or transferred to Mississippi. The court in Alabama denied Byrd Chips request, saying that: ""[t]he place of arbitration determines the jurisdiction of the court"" and that it has ""exclusive authority to vacate, modify or correct the award"" of the arbitration in its district.

Byrd Chips appealed, claiming that the Federal Arbitration Act provided that the case should be deferred to the Southern District of Mississippi because the company had first filed suit in the state.

The 11th Circuit Court of Appeals affirmed the decision of the Alabama trial court. The court concluded that the Federal Arbitration Act does not make venue permissive, and that the case must be heard in the district in which the arbitration award was made.

But the appeals court did note that there is ""a significant split of authority in the U.S. courts of appeals as to whether [the Federal Arbitration Acts] venue provisions are permissive or mandatory"" and that ""the Supreme Court has never resolved this conflict.""

The U.S. Supreme Court granted certiorari on Sept. 10, 1999, and on March 21, 2000, the Court resolved it unanimously by reversing the appeals court and holding that the FAAs venue provisions are permissive.

Writing for the Court, Justice David Souter found that Cortez Byrds Mississippi motion was clearly proper as a diversity action under the general venue statute because it was filed where the contract was performed.

The Court then went on to reason that because both the history and function of the FAA's venue provisions dictate that they were meant to expand, not limit, venue choice, it was appropriate for Cortez Byrd to seek to vacate the arbitrator's award in in federal court in Mississippi.