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Ronco Consulting Corp. v. Leading Edge Ventures, LLC

United States District Court, D. Maryland, Southern Division

December 12, 2017



          Paul W. Grimm, United States District Judge

         Plaintiff RONCO Consulting Corporation (“RONCO”) seeks to vacate an arbitration award issued in favor of Defendant Leading Edge Ventures, LLC (“Leading Edge”), and has moved for summary judgment in its favor. Leading Edge seeks to dismiss RONCO's complaint and to confirm the same award. Because RONCO did not serve timely notice of its application to vacate the award on Leading Edge, I must grant Leading Edge's motion to dismiss as well as its petition to confirm the award, and I will deny RONCO's summary judgment motion as moot.


         RONCO, which had been awarded “a prime contract to perform security vetting services at the Kandahar Air Base in Afghanistan, ” entered into a subcontract (“Agreement”) with Leading Edge. Compl. 1, ECF No. 1; see Agr., Compl. Ex. A, ECF No. 1-2. Pursuant to the Agreement, Leading Edge had to “provide ‘written proof of the ability to assign fully cleared personnel' prior to award”; to do so, “Leading Edge had to obtain a ‘Facility Clearance'” from the United States Department of Defense's Defense Security Services (“DSS”) division. Compl. 1; Agr. § 2.2. Acting as sponsor for Leading Edge (as it was obligated to do), RONCO submitted three Facility Clearance applications to DSS, but did not obtain the clearance because it failed to provide a required form (a “DD-254 form”), which RONCO claims it “could not provide.” Compl. 2. Consequently, RONCO terminated the Agreement.

         The Agreement also included an arbitration provision, Agr. § 10.4, pursuant to which Leading Edge sought to arbitrate the termination. Compl. 2. RONCO agreed to arbitration, while maintaining that “the merits of DSS's decision to reject the [Facility Clearance] application cannot be questioned in the arbitration proceeding.” Id. The arbitrator ruled in Leading Edge's favor, finding that “the ‘DSS Specialists were in error' in demanding the DD 254 form” and that “RONCO should have given Leading Edge the opportunity to ‘disabuse DSS' from insisting on a DD 254.” Id. He issued a Final Award in Washington, District of Columbia, on November 3, 2016. Final Award, Compl. Ex. C, ECF No. 1-4 (incorporating April 7, 2016 Partial Final Award, Compl. Ex. B, ECF No. 1-3, by reference).

         On February 1, 2017, RONCO filed a complaint in this Court, seeking to vacate the arbitration award. Leading Edge filed a timely Petition to Confirm Arbitration Award as part of this same litigation. ECF No. 21; see Ans. to Pet. 2, ECF No. 22 (acknowledging that “Leading Edge applied to the Court for an order confirming the award within one year after the award is made as contemplated by 9 U.S.C. § 9”). Additionally, Leading Edge filed an Amended Motion to Dismiss Complaint to Vacate, ECF No. 23, in which it also sought confirmation of the arbitration award.[1] Its primary argument is that RONCO failed to properly or timely serve it with notice of its Complaint to Vacate pursuant to the requirements of the Federal Arbitration Act (“FAA”), 9 U.S.C. § 12, because it did not effect service by U.S. Marshal, and it did not serve the Complaint (or notice of it) within three months of the arbitration award. Def.'s Mem. 5, ECF No. 23-1.

         RONCO does not claim that it served notice by U.S. Marshal or within three months of the issuance of the Final Award. Yet, it believes that its Complaint to Vacate is properly before the Court because it “commenced the action within three months after the final award was filed or delivered” and it “complied with the request to waive service of process provision in Rule 4 and then served Defendant within 90 days as now required by Rule 4.” Pl.'s Mot. Sum. J. 1, ECF No. 26. RONCO has filed a Motion for Summary Judgment, along with a Memorandum in Support of its motion and in response to Leading Edge's Amended Motion to Dismiss, ECF No. 27. Leading Edge filed a Reply, ECF No. 28, with regard to both its Amended Motion to Dismiss and RONCO's summary judgment motion. RONCO has not filed a reply with regard to its summary judgment motion, and the time for doing so has passed. See Loc. R. 105.6. A hearing is not necessary. Because RONCO failed to comply with the notice requirements of the FAA, it is unnecessary for me to reach its additional arguments attacking the arbitrator's award. I will grant Leading Edge's Amended Motion to Dismiss and deny RONCO's Complaint to Vacate, treated as a motion to vacate, and I will deny its Motion for Summary Judgment as moot. Additionally, I will grant Leading Edge's Petition to Confirm Arbitration Award.

         Standard of Review

         Pursuant to Rule 12(b)(6), RONCO's pleadings are subject to dismissal if they “fail[ ] to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). A pleading must contain “a short and plain statement of the claim showing that the pleader is entitled to relief, ” Fed.R.Civ.P. 8(a)(2), and must state “a plausible claim for relief, ” Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009). That is, “while a plaintiff does not need to demonstrate in a complaint that the right to relief is ‘probable, ' the complaint must advance the plaintiff's claim ‘across the line from conceivable to plausible.'” Gibson v. U.S. Postal Serv., No. CCB-13-2959, 2014 WL 2109919, at *1 (D. Md. May 20, 2014) (quoting Walters v. McMahen, 684 F.3d 435, 439 (4th Cir. 2012)). Therefore, it must contain factual allegations that are “enough to raise a right to relief above the speculative level . . . on the assumption that all the allegations in the complaint are true (even if doubtful in fact).” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, (2007) (internal citations and alterations omitted). Accordingly, for purposes of considering a motion to dismiss, this Court accepts the facts alleged in the Complaint as true. See Aziz v. Alcolac, 658 F.3d 388, 390 (4th Cir. 2011). And, “[a] copy of a written instrument that is an exhibit to a pleading, ” such as the Agreement and the Final Award, “is a part of the pleading for all purposes.” Fed.R.Civ.P. 10(c). I also will consider the Stipulated Facts that the parties jointly submitted. See Levin v. United States, No. PX 15-1880, 2017 WL 4023177, at *1 (D. Md. Sept. 13, 2017) (“These facts are derived from Levin's Complaint and the parties' joint stipulation of facts, and are accepted as true for purposes of Defendant's motion to dismiss.”); Robinson v. Bd. of Ed. of St. Mary's Cty., 143 F.Supp. 481, 484 (D. Md. 1956) (“The parties have filed a stipulation of facts and have agreed that the stipulation and attached exhibits may be used in whole or in part by any of the parties at the hearing on the motion to dismiss . . . .”).

         Governing Law

         Both parties seek relief pertaining to an arbitration award issued in Leading Edge's favor, with Leading Edge seeking to enforce it while RONCO seeks to vacate it. There is an “emphatic federal policy in favor of arbitral dispute resolution.” Fakhri v. Marriot Int'l Hotels, Inc., 201 F.Supp.3d 696, 709-10 (D. Md. 2016) (quoting Mitsubishi Motors Corp. v. Soler Chrysler- Plymouth, Inc., 473 U.S. 614, 631 (1985); citing, e.g., ESAB Grp., Inc. v. Zurich Ins. PLC, 685 F.3d 376, 390 (4th Cir. 2012)), appeal dismissed, No. 16-2061, 2016 WL 9724329 (4th Cir. Oct. 21, 2016). Consequently, “[j]udicial review of an arbitration award in federal court is ‘substantially circumscribed.'” Three S Del., Inc. v. DataQuick Info. Sys., Inc., 492 F.3d 520, 527 (4th Cir. 2007) (quoting Patten v. Signator Ins. Agency, Inc., 441 F.3d 230, 234 (4th Cir. 2006)). Indeed, given that “full scrutiny of such awards would frustrate the purpose of having arbitration at all-the quick resolution of disputes and the avoidance of the expense and delay associated with litigation, ” a court's review of an arbitration award “is among the narrowest known at law.” Id. (quoting Apex Plumbing Supply, Inc. v. U.S. Supply Co., 142 F.3d 188, 193 (4th Cir. 1998)).

         RONCO filed its complaint in this Court pursuant to Chapter 2 of the Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 201-08. Compl. ¶ 12. Chapter 2 implements the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “Convention”). The Convention covers arbitration agreements and awards arising out of commercial relationships where one party is not a citizen of the United States, as well as where both parties are U.S. citizens and, as here, the agreement or award “envisages performance or enforcement abroad.” 9 U.S.C. § 202. It confers jurisdiction on federal district courts for actions “falling under the Convention, ” which are “deemed to arise under the laws and treaties of the United States.” 9 U.S.C. § 203. And, it adopts the provisions of Chapter 1 of the FAA, 9 U.S.C. §§ 1-12, “to the extent that chapter is not in conflict with . . . chapter [2] or the Convention as ratified by the United States.” 9 U.S.C. § 208; see also Yusuf Ahmed Alghanim & Sons v. Toys “R” Us, Inc., 126 F.3d 15, 21 (2d Cir. 1997) (concluding that the Convention “allow[s] a court in the country under whose law the arbitration was conducted to apply domestic arbitral law, in this case the FAA, to a motion to set aside or vacate that arbitral award”).

         Section 9 permits the court to confirm an arbitration award, while Section 10 directs the court to vacate an arbitration award under limited circumstances.[2] 9 U.S.C. §§ 9, 10. Section 9 provides:

If the parties in their agreement have agreed that a judgment of the court shall be entered upon the award made pursuant to the arbitration, and shall specify the court, then at any time within one year after the award is made any party to the arbitration may apply to the court so specified for an order confirming the award, and thereupon the court must grant such an order unless the award is vacated, modified, or corrected as prescribed in sections 10 and 11 of this title. If no court is specified in the agreement of the parties, then such application may be made to the United States court in and for the district within which such award was made.

9 U.S.C. § 9. Section 10 states:

[T]he United States court in and for the district wherein the award was made may make an order vacating the award upon the application of any party to the arbitration--
(1) where the award was procured by corruption, fraud, or undue means;
(2) where there was evident partiality or corruption in the arbitrators, or either of them;
(3) where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by ...

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