Case of the Day: D&D Automation v. MB Sistemas

The case of the day is D&D Automation, Inc. v. MB Sistemas S. Coop. (W.D.N.Y. 2012). D&D, a Canadian firm, had a contract with MB Sistemas, a Spanish firm. When MB terminated the contract and demanded arbitration, D&D brought an action in the New York Supreme Court in Chemung County to enjoin the arbitration on the grounds that the parties had never agreed to arbitration.1 In June 2012, the judge dismissed the claim on the merits, finding that D&D had indeed agreed to arbitrate. D&D appealed to the Appellate Division of the Supreme Court. A couple of days later, MB Sistemas then removed the case to the federal court.

D&D moved to remand the case on the grounds that the remand was not timely, and the federal judge granted the motion. But MB Sistemas sought reconsideration, arguing that the ordinary thirty-day period for removal under 28 U.S.C. [section] 1446 did not apply, but that the FAA removal statute, [section] 205, governed instead.

Section 205 provides:

Where the subject matter of an action or proceeding pending in a State court relates to an arbitration agreement or award falling under the Convention, the defendant or the defendants may, at any time before the trial thereof, remove such action or proceeding to the district court of the United States for the district and division embracing the place where the action or proceeding is pending. [ellipsis]

MB Sistemas argued that there had been no trial, and therefore the removal was timely. But the judge rejected this reading of the statute on the strength of LaFarge Coppee v. Venezolana de Cementos, 31 F.3d 70 (2d Cir. 1994). The judge construed the statute to mean that trial occurred when the state court dismissed the action on the merits. I think the outcome of the case is plainly correct, though I wonder whether the judge chose the right way to get there. Was it necessary to construe “trial” to include “dispositive motion”? Or would it have been cleaner just to say that the statute cannot apply once the state court action is concluded by a final decision on the merits?

  1. Why Chemung County? Who knows! The only city in the county is Elmira, population 29,200 as of the 2010 census. No disrespect to the citizens of Elmira or Chemung County.

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