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[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
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No. 19-12066
Non-Argument Calendar
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D.C. Docket No. 2:18-cv-00120-RWS
WASTECARE CORPORATION.,
Plaintiff-Appellee,
versus
HARMONY ENTERPRISES, INC.,
Defendant-Appellant.
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Appeal from the United States District Court
for the Northern District of Georgia
________________________
(July 23, 2020)
Before JORDAN, BRANCH, and TJOFLAT, Circuit Judges.
PER CURIAM:
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This appeal arises from a lawsuit between WasteCare Corporation
(“WasteCare”) and its partner in the sale and manufacture of automatic trash
compactors (“ACR”), Harmony Enterprises (“Harmony”). When their two-decade
business relationship proved unsuccessful, WasteCare filed suit against Harmony,
seeking relief for Harmony’s alleged violation of the parties’ Licensing Agreement
(the “Agreement”). In response, Harmony moved to stay the proceeding and
compel binding arbitration pursuant to the Agreement’s arbitration provision. The
district court granted Harmony’s motion, but upon WasteCare’s motion for
reconsideration and leave to file an amended complaint, vacated that order.
Harmony now appeals. Because we find the district court erred in vacating its
prior order compelling arbitration, we reverse.
I
WasteCare, a Georgia corporation, led the development of the ACR—an
automatic trash compactor designed for restaurants chains, airports, and other
public establishments. On January 7, 2005, it entered into the underlying
Agreement with Harmony, a Minnesota corporation. The Agreement provided that
Harmony would continue to manage the ACR design, manufacture, and service, as
well as assume WasteCare’s sales and marketing responsibilities. The Agreement
further required Harmony to pay WasteCare royalties on all new ACRs that
Harmony “caused to be sold.”
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On May 18, 2018, WasteCare filed a complaint in Georgia state court. The
original complaint alleged that Harmony colluded with other ACR sellers to act as
“secret sales arms” and sell WasteCare’s ACRs in order to avoid paying
WasteCare royalties. WasteCare also alleged that Harmony failed to comply with
the monthly reporting requirement under the Agreement regarding new ACRs
Harmony “has sold or has caused to be sold to any entity.” Thus, WasteCare
argued Harmony materially breached the Agreement and sought what it described
as “equitable relief” for this breach. Specifically, WasteCare’s original complaint
requested: (1) “a declaratory judgment that . . . Harmony violated [the
Agreement], . . .” (2) an accounting of royalties owed by Harmony to WasteCare
pursuant to the Agreement, and (3) an injunction terminating Harmony’s rights in
the ACR product line “for a period of 10 years.” Harmony successfully removed
the case to the United States District Court for the Northern District of Georgia and
then moved to stay proceedings and compel binding arbitration.
Harmony pointed to the arbitration clause in the parties’ Agreement, which
provides:
In the event that any controversy or claim (excepting claims as to
which party may be entitled to equitable relief) arising out of this
Agreement cannot be settled by the parties hereto, such controversy or
claim shall be settled by arbitration in accordance with the then
current commercial rules of arbitration of the American Arbitration
Association.
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Harmony asserted the carveout for equitable claims did not apply because
WasteCare’s complaint mischaracterized its breach of contract claims as equitable
ones.
WasteCare responded to the motion by noting that its complaint, “seeks only
equitable relief and nothing else.” The district court found “it is clear that
[WasteCare] is attempting to assert breach of contract claims against [the]
Defendant under the guise of an action for equitable relief.” In so finding, the
district court granted Harmony’s motion to compel arbitration.
WasteCare then moved for reconsideration pursuant to Rule 54(b) of the
Federal Rules of Civil Procedure1 and, in the alternative, leave to file an Amended
Complaint. [Doc. 15.] The Amended Complaint attached to the motion abandoned
the request for declaratory relief, and instead requested: (1) rescission of the
Agreement, (2) an accounting of the royalties Harmony owes, and (3) injunctive
relief barring Harmony from competing in the domestic ACR industry for 10 years.
The district court granted both forms of relief. The district court explained
that it “reviewed the proposed Amended Complaint . . . and [found] that it properly
asserts cognizable equitable claims that appear to fall within the express exception
1
Rule 54(b) states, in relevant part, that “any order . . . may be revised at any time before
the entry of a judgment adjudicating all the claims and all the parties’ rights and liabilities.”
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provided by the parties’ Licensing Agreement.” Accordingly, the district court
allowed WasteCare to file the Amended Complaint and vacated its prior order
compelling arbitration.
On appeal, Harmony asserts the district court “abused its discretion and
committed clear error” by reconsidering its initial motion compelling arbitration
and thereby improperly determining the issue of arbitrability.
II.
We review a district court’s grant of a motion for reconsideration for abuse
of discretion. Region 8 Forest Serv. Timber Purchasers Council v. Alcock,
993 F.
2d 800, 805–806 (11th Cir. 1993). “A district court by definition abuses its
discretion when it makes an error of law.” Koon v. United States,
518 U.S. 81, 100
(1996). “We review de novo both the district court’s denial of a motion to compel
arbitration and the district court’s interpretation of an arbitration clause.” Jones v.
Waffle House, Inc.,
866 F.3d 1257, 1263 (11th Cir. 2017) (internal citations
omitted). The grant of WasteCare’s motion for reconsideration was effectively a
denial of Harmony’s motion to compel arbitration. We therefore review the
district court’s decision de novo.2
2
Because we hold that the district court erred by making an error of law, whether we
review this decision de novo or under an abuse of discretion standard does not, at bottom, affect
the outcome. See
Koon, 518 U.S. at 100 (“Little turns, however, on whether we label review of
this particular question abuse of discretion or de novo, for an abuse-of-discretion standard does
not mean a mistake of law is beyond appellate jurisdiction. . . . The abuse-of-discretion standard
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III.
The parties disagree as to whether it was appropriate for the district court to
entertain WasteCare’s motion for reconsideration in the first place. 3 But at the
heart of this appeal is whether, by granting the motion for reconsideration and
reversing its prior order compelling arbitration, the district court erred in
determining the issue of arbitrability. Harmony argues that, under the Agreement,
the question of the arbitrability of WasteCare’s claims should have been submitted
to the arbitration panel. We agree.
“Unless the parties clearly and unmistakably provide otherwise, the question
of whether the parties agreed to arbitrate is to be decided by the court, not the
arbitrator.” AT & T Techs., Inc. v. Commc’ns Workers of Am.,
475 U.S. 643, 649
(1986). And “when the parties’ contract delegates the arbitrability question to an
arbitrator, a court may not override the contract . . . even if the court thinks that the
includes review to determine that the discretion was not guided by erroneous legal
conclusions.”).
3
Harmony argues that the district court abused its discretion by considering WasteCare’s
motion for reconsideration even though its motion was untimely and “inappropriate.” Harmony
also claims that the district court abused its discretion by failing to provide an adequate
explanation for its decision to grant the motion for reconsideration. Because we hold that the
district court erred in granting the motion for reconsideration on other grounds, we need not
reach those arguments here.
Harmony also makes a related argument that the district court abused its discretion in
allowing WasteCare to amend its complaint because that amendment was futile. “The decision
whether to grant leave to amend is committed to the sound discretion of the trial court.” Espey v.
Wainwright,
734 F.2d 748, 750 (11th Cir. 1984); see also Fed. R. Civ. P. 15(a)(2). Given that
wide grant of discretion, we decline to find that the district court abused it here.
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argument that the arbitration agreement applies to a particular dispute is wholly
groundless.” Henry Schein, Inc. v. Archer & White Sales, Inc.,
139 S. Ct. 524, 529
(2019).
Here, the parties agreed to submit the issue of arbitrability to the arbitrators.
As noted above, the Agreement’s arbitration clause invokes the “current
commercial rules of arbitration of the American Arbitration Association.” Rule
7(a) of the American Arbitration Association (“AAA”) Commercial Rules, in turn,
provides that “[t]he arbitrator shall have the power to rule on his or her own
jurisdiction, including any objections with respect to the existence, scope or
validity of the arbitration agreement.”4 Am. Arbitration Ass’n, Commercial Rules,
https://adr.org/sites/default/files/Commercial%20Rules.pdf. We have held that
where the parties expressly incorporate the AAA rules into an arbitration
provision, “this alone serves as a clear and unmistakable delegation of questions of
arbitrability to an arbitrator.” JPay, Inc. v. Kobel,
904 F.3d 923, 936 (11th Cir.
2018); see also Terminix Int’l Co. v. Palmer Ranch LP,
432 F.3d 1327, 1332 (11th
Cir. 2005). Harmony and WasteCare therefore clearly and unmistakably delegated
questions of arbitrability to an arbitrator.
4
The current version of the AAA rules has been in effect since October 1, 2013 and
therefore applies to this dispute.
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WasteCare asserts JPay is inapposite because in that case we found intent to
delegate questions of arbitrability to an arbitrator where the parties’ agreement
incorporated the AAA rules and included an express delegation of questions of
arbitrability. This argument is unpersuasive. We expressly stated in JPay that the
incorporation of the AAA rules “alone serves as a clear and unmistakable
delegation of questions of arbitrability to an arbitrator” and that either the
incorporation of the AAA rules or an express delegation “would amount to a clear
and unmistakable delegation of questions of arbitrability to the arbitrator.”
JPay,
904 F.3d at 936.
The arbitration provision’s carve-out for equitable relief does not affect this
analysis. Although WasteCare’s claims may indeed be equitable ones, that
“confuses the question of who decides arbitrability with the separate question of
who prevails on arbitrability.”
Schein, 139 S. Ct. at 531. In Schein, the Supreme
Court considered an arbitration provision that included a carve-out for equitable
relief and provided AAA rules would govern arbitration. 5
Id. at 528. The Court
5
In full, the arbitration provision at issue in Schein provided:
Disputes. This Agreement shall be governed by the laws of the State of North
Carolina. Any dispute arising under or related to this Agreement (except for
actions seeking injunctive relief and disputes related to trademarks, trade
secrets, or other intellectual property of [Schein]), shall be resolved by binding
arbitration in accordance with the arbitration rules of the American Arbitration
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rejected the argument that the district court could determine the gateway question
of arbitrability because the plaintiff’s claims clearly fit into the carve-out
provision, rendering the defendant’s argument for arbitration “wholly groundless.”
Id. at 539. Citing AT&T Technologies, the Court held, “[j]ust as a court may not
decide a merits question that the parties have delegated to an arbitrator, a court
may not decide an arbitrability question that the parties have delegated to an
arbitrator.”
Id. at 530; see also
Jones, 866 F.3d at 1269 (“If the parties clearly and
unmistakably intended to arbitration all gateway issues, then all gateway issues—
regardless of how frivolous the court may deem them to be—should be
arbitrated.”) (emphasis in original). Here, the parties expressly delegated the
arbitrability issue to an arbitrator. Thus, the arbitrator must decide whether
WasteCare can litigate its claims in district court.6
Accordingly, the district court erred in granting reconsideration of its prior
order compelling arbitration, which effectively denied Harmony’s motion to
compel. We, therefore, REVERSE the district court’s reconsideration of its order
Association [(AAA)]. The place of arbitration shall be in Charlotte, North
Carolina.
Schein, 139 S. Ct. at 528 (emphasis added).
6
This Court, therefore, cannot address Harmony’s argument that WasteCare’s claims fall
within the scope of the arbitration provision. That question must be resolved by the arbitrator.
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compelling arbitration and REMAND with instructions that WasteCare’s claims be
referred to arbitration.
REVERSED and REMANDED.
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