Tempe Hospitality Ventures, LLC v. Highgate Hotels, Lp

• Court: Court of Appeals for the Ninth Circuit
• Decided: December 18, 2023
• Docket: 22-16330
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS DEC 18 2023 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

TEMPE HOSPITALITY VENTURES, LLC, No. 22-16330 an Arizona limited liability company, D.C. No. 2:22-cv-00647-SPL Plaintiff-Appellant,

v. MEMORANDUM*

HIGHGATE HOTELS, LP, a Delaware limited partnership,

Defendant-Appellee.

Appeal from the United States District Court for the District of Arizona Steven Paul Logan, District Judge, Presiding

Submitted October 16, 2023** Submission Vacated October 18, 2023 Resubmitted December 18, 2023 Phoenix, Arizona

Before: IKUTA, BADE, and BRESS, Circuit Judges. Concurrence by Judge BRESS.

Plaintiff-Appellant Tempe Hospitality Ventures, LLC appeals the district

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The panel unanimously concludes this case is suitable for decision without oral argument. See Fed. R. App. P. 34(a)(2). court’s order compelling it to arbitrate its claims against Defendant-Appellee

Highgate Hotels, LP. We issued a limited remand so the district court could

ascertain its jurisdiction, and that court concluded it had jurisdiction under 28

U.S.C. § 1332. We have jurisdiction under 9 U.S.C. § 16(a)(3), and we affirm.

1. The Hotel Management Agreement’s (HMA) adoption of the American

Arbitration Association’s commercial arbitration rules constitutes clear and

unmistakable evidence that the parties intended to delegate threshold questions of

arbitrability to an arbitrator. See Brennan v. Opus Bank, 796 F.3d 1125, 1130 (9th

Cir. 2015). The district court properly concluded that an arbitrator must decide

whether Tempe Hospitality’s claims are within the scope of the HMA’s arbitration

clause. See, e.g., Henry Schein, Inc. v. Archer & White Sales, Inc., 139 S. Ct. 524,

527 (2019) (stating that parties may “agree by contract that an arbitrator, rather

than a court, will resolve threshold arbitrability questions as well as underlying

merits disputes”).

2. The carve-out provision in section 23.3.7 of the HMA does not negate the

parties’ clear and unmistakable delegation of arbitrability questions to an arbitrator.

Whether section 23.3.7 permits Tempe Hospitality to litigate in the district court its

claim seeking declaratory relief is a delegable question of arbitrability because

“when a tribunal decides that a claim falls within the scope of a carve-out

provision, it necessarily decides arbitrability.” Oracle Am., Inc. v. Myriad Grp.

2 A.G., 724 F.3d 1069, 1076 (9th Cir. 2013). Because the parties clearly and

unmistakably delegated arbitrability questions, an arbitrator must decide whether

the declaratory relief claim is exempt from arbitration under section 23.3.7. The

district court correctly concluded that the language in section 23.3.7 does not

nullify the delegation of threshold arbitrability questions. Moreover, because the

claim seeking declaratory relief challenges the enforceability of the HMA’s fees

provision rather than the enforceability of the delegation provision, the claim is not

exempt from arbitration. See Rent-A-Ctr., W., Inc. v. Jackson, 561 U.S. 63, 72

(2010) (stating that a court must enforce an arbitration agreement containing a

delegation provision unless a party “challenged the delegation provision

specifically”).

AFFIRMED.

3 FILED DEC 18 2023 Tempe Hospitality v. Highgate Hotels, No. 22-16330 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS BRESS, Circuit Judge, concurring in the judgment:

The parties’ Hotel Management Agreement (HMA) adopted the American

Arbitration Association’s (AAA) commercial arbitration rules. I agree with the

majority that, standing alone, this would constitute “clear and unmistakable

evidence” that the parties intended to delegate threshold questions of arbitrability to

an arbitrator. See Brennan v. Opus Bank, 796 F.3d 1125, 1130 (9th Cir. 2015). If

that were the only question, this would be a very easy case under our precedents.

But the HMA also contains a provision, Section 23.3.7, which states that “the Parties

shall have the right to commence litigation or other legal proceedings with respect

to any Claims solely relating to . . . enforcement of the dispute resolution provisions

of this Agreement.” Tempe Hospitality Ventures argues that this provision allows it

to challenge the enforceability of the arbitration clause in court. In Tempe’s view,

the arbitration clause is unconscionable, and Section 23.3.7 evinces the parties’

intent to allow a court to decide whether the arbitration clause is enforceable.

The majority concludes that the meaning of Section 23.3.7 is a matter for the

arbitrator because “when a tribunal decides that a claim falls within the scope of a

carve-out provision, it necessarily decides arbitrability.” Oracle Am., Inc. v. Myriad

Grp. A.G., 724 F.3d 1069, 1076 (9th Cir. 2013). The appellee here did not invoke

Oracle in this way, and the majority’s reliance on the case is not correct.

1 Oracle involved an arbitration clause that incorporated commercial arbitration

rules, like those of the AAA, which direct that questions of arbitrability are to be

decided by the arbitrator. Id. at 1071, 1073. But the arbitration clause there also

contained a “carve-out” providing that certain types of claims could be brought in

court. Id. at 1071. Oracle argued that the carve-out expressed the parties’ intent that

a court would decide arbitrability. Id. at 1075. We disagreed because “Oracle’s

argument conflates the scope of the arbitration clause, i.e., which claims fall within

the carve-out provision, with the question of who decides arbitrability.” Id. at 1076

(emphasis in original).

The majority here appears to conclude that because the HMA has an

arbitration provision that incorporates the AAA rules, the parties have necessarily

evinced a clear and unmistakable intent to delegate questions of arbitrability to the

arbitrator, who can then decide if a carve-out (Section 23.3.7) disallows the

arbitration of Tempe’s unconscionability argument. But a provision that could be

described as “carve-out” does not inescapably go to the scope of the arbitration

clause. We reached that conclusion in Oracle only after interpreting the disputed

carve-out and concluding that it was simply a limit on what claims could be

arbitrated, not a limit on arbitrators deciding arbitrability. See 724 F.3d at 1076.

Here, Tempe effectively argues that the parties incorporated the AAA rules

(and their delegation of arbitrability to the arbitrator) but also adopted a warring

2 provision in Section 23.3.7 that directs courts to decide the enforceability of the

dispute resolution provisions. If that were true, there likely would not be the required

“clear and unmistakable evidence” that the parties intended to delegate questions of

arbitrability to the arbitrator. So to decide whether there is, in fact, clear and

unmistakable evidence of an agreement to arbitrate, we need to interpret Section

23.3.7 ourselves, as the district court below did.

That is what we did in Oracle itself. There, we did not walk away from the

carve-out just because it was a carve-out, but rather explained why the carve-out

was—in that case—merely a limit on the scope of arbitrable claims and not reflective

of any agreement that a court could decide threshold issues of arbitrability. In other

words, it is not enough to describe Section 23.3.7 as a carve-out from the arbitration

clause when Tempe is arguing that this provision specifically directs a court to decide

if the agreement to arbitrate is enforceable. 1

Turning to the meaning of Section 23.3.7, I conclude, like the district court,

that Tempe’s interpretation is incorrect. Section 23.3.7 does not allow courts to

decide the “enforceability” of the HMA’s dispute resolution mechanisms. It instead

1 At one point, the majority states that “[t]he district court correctly concluded that the language in section 23.3.7 does not nullify the delegation of threshold arbitrability questions.” But the district court did what I am doing and what the majority elsewhere indicates should not be done: interpret the meaning of Section 23.3.7. The majority cannot say both that the meaning of Section 23.3.7 is for the arbitrator and that the district court correctly interpreted it.

3 states in relevant part that the parties may litigate in court with respect to

“enforcement of the dispute resolution provisions of this Agreement.” Enforcement

does not mean enforceability. Instead, “enforcement” means “[t]he act or process of

compelling compliance with a[n] . . . agreement.” Enforcement, Black’s Law

Dictionary (11th ed. 2019). Thus, under Section 23.3.7 a party could go to court to

compel arbitration. But that does not mean a court can decide the enforceability of

the arbitration clause itself.

Because Tempe is wrong about the meaning of Section 23.3.7, what we are

left with is the HMA’s adoption of the AAA rules. Under our case law, incorporation

of those rules is clear and unmistakable evidence of an intent to delegate questions

of arbitrability (like Tempe’s unconscionability argument) to the arbitrator. See

Brennan, 796 F.3d at 1130. And Tempe raises no specific unconscionability

argument as to this delegation provision itself. See Rent-A-Center, W., Inc. v.

Jackson, 561 U.S. 63, 71–72 (2010).

For these reasons, the district court properly ordered that the parties’ dispute

proceed in arbitration.