How To Compel Arbitration When Litigation Is Commenced In State Court

In a previous post, we addressed what may happen when a defendant in federal litigation seeks to compel arbitration under Ch. 1 of the Federal Arbitration Act ("FAA"), 9 U.S.C. § 4, but the applicable arbitration agreement specifies a place of arbitration that is outside the geographic jurisdiction of the federal court. (See https://www.mintz.com/insights-center/viewpoints/2017-07-spectre-haunts-motions-compel-arbitration-venue.) But what approaches are available to a defendant when a plaintiff files suit in a state court, the claim is subject to an arbitration agreement, and the agreed place of arbitration is in a different state?

1. Recap of Suggested Approach in Federal Court

   In brief, (1) federal district courts in the Fifth and Eleventh Circuits may compel arbitration in the place specified in the arbitration agreement, wherever that place may be; (2) district courts in the Ninth Circuit may compel arbitration within their own geographic jurisdictions, whatever the place specified in the arbitration agreement may be; and (3) the majority of federal courts may decline to compel arbitration at all if the agreed place is outside of their geographic districts. Hence, if litigation is commenced in a federal court outside the Fifth or Eleventh Circuits, we recommended first moving to transfer the case, under 28 U.S.C. § 1404(a), to the district containing the place of arbitration, and then moving to stay or dismiss the suit while compelling arbitration.

2. Similar Approach in State Court: Removal and Transfer

   One obvious approach to the same end starting in state court requires one additional step. Where proper grounds exist, one could seek to remove a state court action to federal court, and then to follow the approach in federal court described above -- move to transfer the suit to a federal district court that would compel arbitration in the agreed place of arbitration. See, e.g., Hollis v. Fla. State Univ., 259 F.3d 1295, 1296 (11th Cir. 2001) ("A defendant dissatisfied with venue after removal may . . . seek a transfer to another division or district under federal law."); Thomas & Agnes Carvel Found. v. Carvel, 736 F. Supp. 2d 730, 754 n.25 (S.D.N.Y. 2010) (the defendant "could have moved to transfer [the] case to another federal district court after removal....") (citing PT United Can Co. Ltd. v. Crown Cork & Seal Co., Inc., 138 F.3d 65, 72-73 (2d Cir. 1998)).

   In order to be able to remove a state court action to federal court, the...