United States District Court, D. Minnesota
ORDER GRANTING DEFENDANT'S MOTION TO
Wilhelmina M. Wright United States District Judge
contract dispute, Defendant North American Fertilizer, LLC
(NAF) moves to dismiss Plaintiff Benson Power, LLC's
(Benson Power) amended complaint. (Dkt. 14.) For the reasons
addressed below, NAF's motion to dismiss is granted.
about 2006, Fibrominn LLC constructed a facility in Benson,
Minnesota, for the purpose of burning biomass (the Facility).
Fibrominn and NAF executed an Ash Sale Agreement in November
2006 (2006 Agreement), whereby Fibrominn agreed to sell to
NAF the ash byproduct generated by the Facility. The Facility
subsequently became subject to a receivership, and Benson
Power purchased the Facility and related assets in 2015.
Benson Power continued to sell ash byproduct to NAF pursuant
to the 2006 Agreement.
addition to selling ash byproduct to NAF, Benson Power sold
power from the Facility to Northern States Power Company
(NSP). Between late 2015 and early 2017, Benson Power
negotiated a potential sale of the Facility to NSP. These
negotiations were subject to a confidentiality agreement that
prohibited Benson Power from disclosing information about the
potential sale. In February 2017, Benson Power and NSP
executed an Asset Purchase and Sale Agreement, whereby Benson
Power agreed to sell the Facility and related assets to NSP
(Asset Sale). The agreement between Benson Power and NSP
included multiple contingencies that had to be met before the
Asset Sale could occur, including certain regulatory
approvals from governmental authorities.
Benson Power and NAF negotiated potential amendments to the
2006 Agreement and executed an Amended and Restated Ash Sale
Agreement in March 2017 (2017 Agreement). The 2017 Agreement
includes a dispute-resolution provision that requires
negotiation, mediation, and arbitration of “[a]ny
dispute arising out of or relating to this Agreement,
including the alleged breach, termination, validity,
interpretation and performance thereof.” The 2017
Agreement also provides that “issues related to the
scope of applicability of this Agreement to arbitrate shall
be submitted to binding arbitration.” Approximately one
month after executing the 2017 Agreement, NAF became aware of
Benson Power's potential sale of the Facility and related
assets to NSP. Around this time, Benson Power and NSP entered
a letter agreement waiving certain confidentiality
obligations, thereby permitting Benson Power to disclose
certain details of the Asset Sale negotiations to NAF. Among
other things, Benson Power disclosed to NAF that NSP likely
would close on the Asset Sale in early 2018 after obtaining
certain regulatory approvals and that NSP intended to shut
down the Facility in 2018.
president signed a consent agreement (Consent Agreement) in
September 2017, whereby NAF agreed to Benson Power's
assignment of the 2017 Agreement to NSP “upon the
[c]losing” of the Asset Sale. NAF acknowledges in the
Consent Agreement that the terms of the 2017 Agreement will
remain unchanged after the assignment to NSP. The Consent
Agreement also provides that, after the Asset Sale closes,
Benson Power will be released from all obligations under the
2017 Agreement “arising from and after” the
closing of the Asset Sale, “excluding liabilities
arising from any breach or nonperformance by Benson [Power]
under the [2017 Agreement] occurring prior to” the
2018, after all contingencies had been fulfilled, Benson
Power and NSP closed on the Asset Sale. As a result, NSP
assumed Benson Power's obligations under the 2017
Agreement. Shortly thereafter, NSP notified NAF via letter of
NSP's election to terminate the 2017 Agreement.
January 2019, NAF provided Benson Power a “Notice of
Dispute” pursuant to the dispute-resolution provision
of the 2017 Agreement. NAF claimed that Benson Power
fraudulently induced NAF to enter into the 2017 Agreement by
concealing material facts about Benson Power's
negotiations with NSP. NAF subsequently delivered a Notice of
Mediation to Benson Power's counsel alleging common-law
fraud and seeking damages.
Power commenced this action against NAF in April 2019 and
filed an amended complaint in June 2019. Benson Power seeks a
judgment declaring, among other things, that NAF consented to
the assignment of the 2017 Agreement to NSP, Benson Power is
not required to arbitrate NAF's claims, and Benson Power
is not liable to NAF for fraud or any other wrongful act
alleged by NAF. NAF moves to dismiss the amended complaint,
arguing that the 2017 Agreement requires mediation and
arbitration of NAF's claims against Benson Power
notwithstanding Benson Power's assignment of the 2017
Agreement to NSP.
moves to dismiss the amended complaint for failure to state a
claim on which relief can be granted, Fed.R.Civ.P. 12(b)(6),
arguing that the 2017 Agreement requires arbitration of the
underlying issues, including disputes pertaining to the scope
of the applicability of the arbitration provision. Benson
Power counters that it is no longer bound by the arbitration
provision in the 2017 Agreement.
an arbitration agreement precludes a court “from
granting judicial relief on any issue within the scope of the
applicable arbitration clause, ” courts evaluate the
applicability of an arbitration agreement under Federal Rule
of Civil Procedure 12(b)(6) for failure to state a claim on
which relief can be granted. Minn. Supply Co. v.
Mitsubishi Caterpillar Forklift Am. Inc., 822 F.Supp.2d
896, 905 n.10 (D. Minn. 2011); accord City of Benkelman,
Neb. v. Baseline Eng'g Corp., 867 F.3d 875, 881-82
(8th Cir. 2017). If a complaint fails to state a claim on
which relief can be granted, dismissal is warranted.
See Fed. R. Civ. P. 12(b)(6). When determining
whether a complaint states a facially plausible claim, a
district court accepts the factual allegations in the
complaint as true and draws all reasonable inferences in the
plaintiff's favor. Blankenship v. USA Truck,
Inc., 601 F.3d 852, 853 (8th Cir. 2010). Factual
allegations must be sufficient to “raise a right to
relief above the speculative level” and “state a
claim to relief that is plausible on its face.”
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 570
(2007). Legal conclusions couched as factual allegations may
be disregarded. See Ashcroft v. Iqbal, 556 U.S. 662,
Federal Arbitration Act (FAA), 9 U.S.C. §§ 1 et
seq., requires courts to enforce written agreements to
arbitrate disputes and reflects a “liberal federal
policy favoring arbitration agreements, ” Moses H.
Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S.
1, 24 (1983). “[C]ontract provisions directing
arbitration shall be enforceable in all but limited
circumstances.” Kelly v. Golden, 352 F.3d 344,
349 (8th Cir. 2003). In addition, contracting parties may
include a “delegation provision” by which they
agree to have an arbitrator decide threshold questions of
arbitrability, such as the validity or scope of the
arbitration agreement. Rent-A-Center, W., Inc. v.
Jackson, 561 U.S. 63, 68-69 (2010); Shockley v.
PrimeLending, 929 F.3d 1012, 1018 (8th Cir. 2019). A