United States District Court, W.D. Wisconsin
D. PETERSON District Judge
August Resource Funding, Inc., brings this suit against
defendants Procorp, LLC, and Timothy Schultz for breach of
contract and replevin. Dkt. 1-1. August Resource says that it
provided funding and administrative services for
defendants' temporary employment agency, but defendants
defaulted on their debt. August Resource says that defendants
breached three different contracts between the parties.
say that August Resource is bound by an arbitration clause
found in the initial contract executed by the parties. They
move to dismiss the case or, in the alternative, compel
arbitration. Dkt. 9. The court will deny the motion because
the arbitration clause was superseded by subsequent documents
executed by the parties.
previous order, the court asked defendants to file
supplemental materials showing that the court can exercise
diversity jurisdiction under 28 U.S.C. § 1332, Dkt. 16.
Defendants have now submitted materials showing the both
defendant Timothy Schultz and defendant Procorp, LLC, are
citizens of Michigan. Dkt. 17. Because August Resource is a
citizen of Wisconsin, and the amount in controversy exceeds
$75, 000, the court is satisfied that complete diversity
exists and that it may exercise jurisdiction under §
refer to their motion as a motion to dismiss under Rule
12(b)(6) for failure to state a claim or, in the alternative,
to compel arbitration. But a motion to dismiss based on a
contractual arbitration clause is appropriately brought as an
objection to venue under Rule 12(b)(3), not under Rule
12(b)(6). See Faulkenberg v. CB Tax Franchise Systems,
LP, 637 F.3d 801, 807-08 (7th Cir. 2011). When ruling on
a motion to dismiss for improper venue, the court may
consider the allegations in the complaint as well as evidence
submitted in support of the motion. See Continental Cas.
Co. v. Am. Nat'l Ins. Co., 417 F.3d 727, 733 (7th
Cir. 2005). The court accepts as true any allegations in the
complaint that are not contradicted by other evidence, and it
resolves all factual disputes and draws all reasonable
inferences in the plaintiff's favor.
Faulkenberg, 637 F.3d at 806. Here, the relevant
facts are undisputed.
operate a temporary employment agency and August Resource is
a company that provides funding and administrative services
for temporary employment agencies. On February 8, 2017, the
parties entered into an agreement for August to provide
defendants with payroll services and interim funding for
defendants' payroll obligations to its employees. Dkt.
10-1. In return, defendants agreed to compensate August
Resource with proceeds it received from its clients. The
agreement contained an arbitration clause:
#14) ARBITRATION. Any controversy arising out of
this Agreement or any amendment thereof now or in the future,
including any claim for damages or rescission or both, which
cannot be resolved between the parties, shall be settled by
arbitration. All arbitration shall be conducted in accordance
with the rules of the American Arbitration Association.
Id., ¶ 14. In addition to the arbitration
clause, the agreement also contained a venue clause that
stated that “any litigation or proceeding arising out
of, in connection with, or relating to this Agreement, shall
be instituted in the Circuit Court of Rock County,
Wisconsin.” Id., ¶ 15.
days later, defendants executed a promissory note for an
original principal balance of $4.9 million. The parties also
executed two additional documents. First, a security
agreement that granted August Resource an interest in
defendants' assets as collateral for payment of the
principal balance. Dkt. 12-2. Second, a continuing guaranty
in which Procorp, and its sole owner-member Schultz, agreed
to be held jointly and severally liable for all debts owed to
August Resource. Dkt. 12-3.
the security agreement nor the guaranty contained an
arbitration clause, but both contained updated
forum-selection clauses. The security agreement states that
“[a]ll actions arising directly or indirectly in
connection with, out of, related to or from this Security
Agreement must be litigated in courts within the State of
Wisconsin.” Dkt. 12-2, ¶ 16. The guaranty also
states that “all actions or proceedings arising
directly or indirectly in connection with, out of, or related
to or from this Guaranty must be litigated in courts within
the State of Wisconsin.” Dkt. 12-3, ¶ 5. But the
next sentence of the guaranty's forum-selection clause
contradicts the rest of the clause: “[a]ny litigation
under this agreement shall be resolved in the trial courts of
Winnebago County, Illinois.” Id.
defaulted on their payments, and August Resource filed suit
in the Circuit Court of Rock County to collect the debt. Dkt.