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Dumont Telephone Co. v. Power & Tel. Supply Co.

United States District Court, N.D. Iowa

August 26, 2013


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For Dumont Telephone Company, Plaintiff: Steven L Nelson, LEAD ATTORNEY, Davis Brown Koehn Shors & Roberts, PC, Des Moines, IA.

For Power & Telephone Supply Company, Defendant: Mark Allen Schultheis, LEAD ATTORNEY, Nyemaster, Goode, Voigts, West, Hansell & O'Brien, PC, Des Moines, IA.

For CSI Digital, Inc, Defendant: Bradley R Kruse, LEAD ATTORNEY, Brown Winick Graves Gross Baskerville Schoenebaum, Des Moines, IA; Jonathan M Gallagher, LEAD ATTORNEY, Brown Winick Graves Gross Baskerville & Schoenebaum, PLC, Des Moines, IA.

For IP Net, LLC, Defendant: Keith T Grumer, LEAD ATTORNEY, PRO HAC VICE, Grumer & Macaluso, PA, Ft. Lauderdale, FL; Rodney D Vellinga, LEAD ATTORNEY, Corbett Anderson Corbett Vellinga & Irvin, LLP, Sioux City, IA.


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A. Factual Background

B. Procedural Background


A. Choice of Law

B. Power & Tel's Motion to Compel Arbitration

1. Is there a valid arbitration agreement?

2. Does this dispute fall within the terms of the

arbitration agreement?

C. I.P. Net's Motion for Stay of Proceedings


The contract at the heart of this case is a lot like Bigfoot; both parties claim it exists, but each tells a different story of where it is and what it looks like. Presently, the parties dispute whether their contract contains an arbitration clause. But this dispute dates back to 2009, when the plaintiff, Dumont Telephone Company (Dumont), contracted with one of the defendants, Power & Telephone Supply Company (Power & Tel), for Power & Tel to deliver modernized telecommunications equipment to Dumont. Power & Tel delivered the equipment, but it did not live up to Dumont's expectations. Dumont refused to pay for it and now each party claims that the other breached the contract.

I must determine the proper forum for the parties to resolve their dispute. Dumont wants to proceed in this court, claiming that the parties formed their contract in July 2009, and that it does not contain an arbitration clause. Power & Tel wants to proceed in a Tennessee arbitration, claiming that the parties formed their contract in October 2009, and that it contains an arbitration clause. This case is before me on Power & Tel's motion to compel arbitration (docket no. 8). Also before me is defendant I.P. Net, LLC's (I.P. Net's) motion for stay of proceedings (docket no. 26). Resolving these motions required me to search the record for the parties' elusive contract to see for myself whether it contains an agreement to arbitrate. It does. Thus, for the reasons discussed below, Power & Tel's and I.P. Net's motions are granted.


In resolving Power & Tel's motion to compel arbitration, I must view the parties' factual allegations in the light most favorable to the nonmoving party, Dumont. Quilloin v. Tenet HealthSystem Philadelphia, Inc. ,

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673 F.3d 221, 228 (3d Cir. 2012). I note, however, that the parties do not appear to dispute the facts necessary to resolve Power & Tel's motion, only the legal conclusions to be drawn from those facts.

A. Factual Background

This case involves a contract--or series of contracts--for the sale of telecommunications equipment by Power & Tel to Dumont. Power & Tel is a Tennessee corporation that procures and sells telecommunications equipment to local telecommunications providers. The telecommunications equipment Power & Tel sells includes " video systems," which are bundles of equipment designed to provide a particular set of video services. For over a decade, Power & Tel has provided telecommunications equipment to Dumont, an Iowa corporation that provides voice, video, and data telecommunications services to business and residential customers in Dumont, Iowa.

Although Dumont's business relationship with Power & Tel dates back to 1998, the underlying dispute in this case began in 2009. In April 2009, Dumont saw the need to modernize its video system to provide more competitive services. Dumont consulted with Power & Tel, and Power & Tel arranged for different equipment vendors to present their video systems to Dumont. Those vendors included defendants CSI Digital, Inc. (CSI) and I.P. Net. CSI is an Oregon corporation that integrates various components of video systems. I.P. Net is a Florida limited liability company that manufactures those components.

On April 15, 2009, Power & Tel and CSI gave a PowerPoint presentation at Dumont's office describing a potential replacement video system. The proposed replacement system--called the " head-end" system--would provide Dumont's customers with new video features that Dumont was not currently providing, including a TV-based web browser with access to internet radio, web content, and social media. The day after the presentation, CSI sent an e-mail to Dumont describing the I.P. Net equipment that would be included in the head-end system (Ex. 1; docket no. 15-2, at 7- 17). Dumont decided to pursue a conversion from its current video system to the headend system.

Most, if not all, of the parties' negotiations happened in July 2009. On July 1, 2009, I.P Net sent a letter to Dumont formally warranting the I.P Net equipment that would be included in the head-end system (Ex. 2; docket no. 15-2, at 18). The next day, July 2, 2009, Power & Tel district manager Michael Kean (Kean) e-mailed a price quote for the head-end system to Dumont general manager Roger Kregel (Kregel) (Ex. 3; docket no. 15-2, at 19-20). In the e-mail, Kean described Power & Tel's price quote as " the final quote with the verbiage in it for the use of return if not as designed" (Ex. 3; docket no. 15-2, at 19). " The verbiage" refers to language added to the " Notes" section on the quote at Dumont's request, which read: " Support charges will not start until 60 days after installation of equipment in the event the customer and CSI determine the product does not work satisfactorily up to 60 days after installation, customer can return for full refund" (Ex. 3; docket no. 15-2, at 20).

The quote purported to be a " cost estimate for Dumont Telephone." It contained the words: " For Budgetary Purposes only." It also listed a number of items of equipment. Some items were quoted at a specific quantity; others simply had " 1" listed as the quantity. Some items were quoted at a specific price; others had no price listed. The quote did, however, list a " Head-End Total" of

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$152,471. The Notes section required Dumont to pay 55% of the price when it made its purchase order, 35% of the price upon delivery, and 10% of the price at a later time. The Notes also contained several comments about the head-end system's price:

o " Pricing is subject to site survey and customer requirements" ;

o " Third party equipment/software pricing is subject to change" ;

o " Travel costs are not included in the price estimate" ; and
o " STB options and installation and support are not included in the Head-End Total"

(Ex. 3; docket no. 15-2, at 20). The term " STB" refers to " set top boxes," which are small boxes that are installed with customers' TVs as part of the head-end system.

On July 6, 2009, Kean and Kregel spoke about the quote over the phone. The parties have provided little information about the details of Kean's and Kregel's conversation. But, based on the parties' dealings after the phone call, two things are clear. First, the parties orally negotiated a set of terms for Dumont's initial equipment purchase, which added to, and modified, the terms in Power & Tel's quote. Second, the parties agreed to move forward with the head-end deal, and Kregel agreed to deliver a check to Power & Tel for 55% of the initial equipment purchase price.

Later that day, Kregel sent an e-mail to Kean confirming the prices of the equipment in the initial order, the total price of the initial purchase, and the amount of Dumont's down-payment check (Ex. 4; docket no. 15-2, at 21). One of the items included in Kregel's e-mail is " I.P. Net Head End" listed at $152,471, which is the same number listed in Power & Tel's quote. But Kregel's e-mail listed additional equipment not included in the quote price:

o " 30--HD Boxes No PVR @ $274 = $8,220.00" ;

o " 30--HD Boxes With PVR @ $306 = $9,180.00" ; and

o " 60--Wireless Antenna's [sic] @ $17.98 = $1,078.80"

(Ex. 4; docket no. 15-2, at 21). This additional equipment included 60 STBs (i.e., " boxes" ) and 60 antennas, costing $18,478.80. The STBs priced at $306 were discounted from the $331 price listed in Power & Tel's quote (Ex. 3; docket no. 15-2, at 20). Adding the STBs and antennas to the I.P. Net Head End price, Kregel's e-mail confirmed a total initial equipment price of $170,949.80. It also confirmed a 55% check amount of $94,022.39. Finally, Kregel noted in the e-mail that it was intended to " double check" the prices " because [Kregel] didn't think this was the exact figure [Kean] said this morning," presumably during their phone conversation (Ex. 4; docket no. 15-2, at 21).

The next day, June 7, 2009, Kregel gave Power & Tel a down-payment check, which cleared Dumont's bank account on July 21, 2009. Upon receiving the check, Power & Tel generated an invoice reflecting the down-payment (Ex. 1, docket no. 19- 2, at 1-2). The invoice lists the down-payment amount as $83,859.05. Neither party explains why this number is different than the $94,022.39 figure listed in Kregel's July 6, 2009, e-mail, though $83,859.05 appears to be 55% of the I.P. Net Head End price before adding in the STBs and antennas. The invoice also contained Power & Tel's standard terms and conditions, including its arbitration clause:

Any dispute, controversy or claim shall be solely and finally settled by arbitration conducted in Memphis, Tennessee in accordance with the Commercial Arbitration rules of the American Arbitration Association then in force. The parties

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shall abide by all awards rendered in arbitration proceedings, and all such awards may be enforced and executed upon by any court having jurisdiction over the party against whom enforcement of such award is sought.

(Ex. 1, docket no. 19-2, at 2). Dumont claims it never received this down-payment invoice. Power & Tel cannot say that it did or did not send the down-payment invoice to Dumont. The record contains no ...

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