Gold Mine Jewelry Shoppes, Inc. v. Lise Aagaard Copenhagen A/S et al

Filing 34

ORDER granting 17 Motion to Dismiss and compel arbitration. Signed by Senior Judge W. Earl Britt on 3/6/2017. (Marsh, K)

UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NORTH CAROLINA
WESTERN DIVISION
No. 5:16-CV-00135-BR
GOLD MINE JEWELRY SHOPPES, INC., )
)
Plaintiff,
)
v.
)
)
LISE AAGAARD COPENHAGEN, A/S, )
and TROLLBEADS UNITED STATES,
)
INC.,
)
Defendants.
)

ORDER

This matter is before the court on the motion to dismiss and compel arbitration filed by
defendants Lise Aagaard Copenhagen, A/S (“Trollbeads”) and Trollbeads United States, Inc.
(“TBUS”) (collectively “defendants”). (DE # 17.) The motion has been fully briefed and is
therefore ripe for disposition.
I. FACTS
Plaintiff Gold Mine Jewelry Shoppes, Inc., (“Goldmine”) is a North Carolina corporation
that has operated a single jewelry store in Raleigh, North Carolina since 1986. (Compl., DE # 1,
at 2-3.) Thomas Martin and his wife, Edlene “Eddi” Martin, are the officers and shareholders of
Goldmine. (Id. at 2; see also Surreply, DE # 28, at 2.) Defendant TBUS is a subsidiary of
defendant Trollbeads, a Denmark corporation. (Compl., DE # 1, at 2.) TBUS is the exclusive
North American distributor of the Trollbeads line of fine jewelry and interchangeable charm
bracelet beads and accessories, as well as certain other products sold under the Trollbeads brand.
(See Ex. 1, DE # 18-1, at 2.) TBUS sells the Trollbeads line through multiple brick and mortar
locations, an e-commerce platform, and contractually-authorized dealers. (Compl., DE # 1, at
11.)

On 21 February 2011, Goldmine and TBUS entered into a written agreement entitled the
“Retailer Agreement.” (See Ex. 1, DE # 18-1.) Per the terms of the Retailer Agreement,
Goldmine was authorized to market and sell the Trollbeads line of fine jewelry under the
trademarks, logos, designs, and copyrights applied by TBUS. (See id. at 2-3.) Goldmine alleges
that it was also required to make payments to TBUS for certain fees, to purchase a point-of-sale
system and countertop displays, and to prominently display the Trollbeads’ logos at both its
brick and mortar location and on its website. (Compl., DE # 1, at 4-5.) The Retailer Agreement
contains a choice of law provision requiring that it be construed in accordance with New Jersey
law. (See Ex. 1, DE # 18-1, ¶ 18.1) The Retailer Agreement also contains an arbitration
provision that states:
Each of the parties hereto herby irrevocably and unconditionally
agrees that any dispute arising out of, or in connection with, the
Agreement or regarding deliveries made under the Agreement
must be settled with final and binding effect in accordance with the
Rules of the American Arbitration Association and that any such
arbitration shall take place in Princeton, New Jersey.
(Id. ¶ 18.2.)1
On 5 August 2014, TBUS informed Goldmine that it intended to terminate the Retailer
Agreement. (Compl., DE # 1, at 11.) On 29 March 2016, Goldmine initiated this suit, alleging
claims under the Sherman Antitrust Act, 15 U.S.C. § 1, et seq., the Clayton Act, 15 U.S.C. § 12,
et seq., and North Carolina state law. (Id.) Thereafter, defendants filed a motion to dismiss and
compel arbitration pursuant to Rule 12(b)(3) of the Federal Rules of Civil Procedure and Section
4 of the Federal Arbitration Act (“FAA”), 9 U.S.C. § 1, et seq. (DE # 17.) In the motion,

1
The parties agree that even though Trollbeads, TBUS’s parent company, is not a signatory to the Retailer
Agreement, Goldmine’s claims against Trollbeads are also subject, if at all, to the arbitration provision in paragraph
18.2 of the Retailer Agreement. See J.J. Ryan & Sons v. Rhone Poulenc Textile, S.A., 863 F.2d 315, 320-21 (4th
Cir. 1988) (holding that a parent company may arbitrate a claim if its subsidiary is a party to an arbitration
agreement and the charges against the parent and subsidiary involve inherently inseparable facts).

2

defendants also request costs and disbursements incurred in connection with the instant motion.
(Id.)
II. ANALYSIS
1. Standard of Review
It is well settled that arbitration clauses are a subset of forum-selection clauses, the
enforcement of which is considered in the Fourth Circuit as a Rule 12(b)(3) motion to dismiss for
improper venue. See Aggarao v. MOL Ship Mgmt. Co., Ltd., 675 F.3d 355, 365 n.9 (4th Cir.
2012) (“[T]he Supreme Court has characterized an arbitration clause as ‘a specialized kind of
forum selection clause.’” (quoting Scherk v. Alberto-Culver Co., 417 U.S. 506, 519 (1974)).
“On a motion to dismiss under Rule 12(b)(3), the court is permitted to consider evidence outside
the pleadings.” Id. at 365-66. A plaintiff must only make a prima facie showing of proper venue
in order to survive a motion to dismiss. Id. at 366. In assessing whether there has been a prima
facie venue showing, the court draws all reasonable inferences in the light most favorable to the
non-moving party. Id.
2. Motion to Dismiss and Compel Arbitration
Defendants move to dismiss the complaint and compel arbitration, arguing that the
arbitration provision contained in paragraph 18.2 of the Retailer Agreement is fully enforceable
and must be enforced on its terms pursuant to the FAA. (Defs.’ Mem. in Support, DE # 18, at 3.)
They contend that each of the claims that Goldmine alleges in the complaint fall squarely within
the arbitration agreement because they “aris[e] out of, or in connection with” the Retailer
Agreement and, therefore, Goldmine must submit them to arbitration before the American
Arbitration Association in Princeton, New Jersey. (Id. at 5.)

3

The FAA governs the rights and responsibilities of the parties with respect to an
arbitration agreement. Patten Grading & Paving, Inc. v. Skanska USA Bldg., Inc., 380 F.3d 200,
204 (4th Cir. 2004). Under the FAA, a written agreement to arbitrate shall be “‘valid,
irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the
revocation of a contract.’” Arthur Anderson LLP v. Carlisle, 556 U.S. 624, 629-30 (2009)
(quoting 9 U.S.C. § 2). The FAA reflects a “liberal federal policy favoring arbitration
agreements, notwithstanding any state substantive or procedural policies to the contrary.” Moses
H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983). “A district court
therefore has no choice but to grant a motion to compel arbitration where a valid arbitration
agreement exists and the issues in a case fall within its purview.” Adkins v. Labor Ready, Inc.,
303 F.3d 496, 500 (4th Cir. 2002) (citation omitted).
Although federal policy presumptively favors the enforcement of arbitration agreements,
it is well-settled that “arbitration is a matter of contract and a party cannot be required to submit
to arbitration any dispute which he has not agreed to submit.” United Steelworkers v. Warrior &
Gulf Navigation Co., 363 U.S. 574, 582-83 (1960); see also Johnson v. Circuit City Stores, Inc.,
148 F.3d 373, 377 (4th Cir. 1998). Whether the parties have agreed to arbitrate a particular
dispute is a matter of contract law in which “the court should apply ‘ordinary state-law principles
that govern the formation of contracts.’” Johnson, 148 F.3d at 377 (quoting First Options of
Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995)). In this case, where the Retailer Agreement
contains a choice of law provision, the parties agree that New Jersey state law should determine
whether the arbitration provision is valid and enforceable.
Goldmine first argues that the waiver-of-rights language in the arbitration provision does
not comply the requirements set forth by the Supreme Court of New Jersey in Atalese v. United

4

States Legal Services Group, L.P., 99 A.3d 306 (N.J. 2014), thus rendering the arbitration
provision void and unenforceable. (Pl.’s Mem. in Opposition, DE # 23, at 3.) Goldmine relies
on Atalese for the proposition that an arbitration provision must explicitly state that the
contracting parties waive their rights to a jury trial or court action. (Id. at 8-10.) Defendants
contend that the arbitration provision did not require a specific waiver of the parties’ rights to
court access because the New Jersey state courts have limited the holding in Atalese to the
context of consumer cases. (Defs.’ Reply, DE # 24, at 1.) More specifically, defendants argue
that Atalese does not control the result in this case because the arbitration provision is not part of
a consumer contract, but, instead, is contained in a “contract negotiated at arm’s length and
entered into by two sophisticated commercial entities.” (Id. at 2.)
In Atalese, the Supreme Court of New Jersey clarified the requirements for a valid
arbitration provision, holding that “[a]n agreement to arbitrate, like any other contract, must be
the product of mutual assent, as determined under customary principles of contract law.” 99
A.3d at 312-13 (citation and internal quotation marks omitted). The court specifically instructed
that, where a contract involves a consumer transaction, “mutual assent” requires that an
arbitration provision contain “waiver-of-rights language” that conveys to the contracting parties
that they are relinquishing their right to bring their “claims in court or have a jury resolve the
dispute.” Id. at 315-16. As defendants correctly point out, subsequent to Atalese, the New
Jersey state courts have limited the holding in Atalese to employment and consumer contexts.
See Myska v. New Jersey Mfrs. Ins. Co., 114 A.3d 761, 778 (N.J. Super Ct. App. Div. 2015)
(“The Court in Atalese has clarified the scope of this requirement in the context of arbitration
clauses contained in consumer contracts.”); Gastelu v. Martin, No. L-4067-14, 2014 WL
10044913, at * 6 & n.4 (N.J. Super. Ct. App. Div. July 9, 2015) (refraining from applying

5

Atalese’s analysis to a commercial business transaction). In Gastelu, the Appellate Division of
the Superior Court of New Jersey stressed the distinction between consumer and commercial
contracts, noting that “the [waiver of rights] standard is not as stringent” for parties to a
commercial contract as the one put forward in Atalese.” 2014 WL 10044913, at * n.4.
The parties here dispute whether the Retailer Agreement signifies a consumer transaction
and, thus, whether the arbitration provision is or is not subject to the stringent standard in
Atalese. Goldmine contends that defendants’ “attempt to categorize the Retailer Agreement as
anything other than a consumer contract is contrary to New Jersey law.” (Surreply, DE # 28, at
5.) Goldmine acknowledges that the Retailer Agreement describes the agreement as establishing
a “distributor/retailer relationship” between the parties. (Compl., DE # 1, at 4.) However, in
Goldmine’s view, the terms and conditions of the Retailer Agreement actually indicate a
“franchisor/franchisee relationship.” 2 (Id.; see also Pl.’s Mem. in Opposition, DE # 23, at 2.)
Goldmine therefore reasons that the parties were involved in a consumer transaction because the
purchase of a franchise is covered by the New Jersey Consumer Fraud Act (“CFA”). (Surreply,
DE # 28, at 5.)
The scope of the CFA “is limited to consumer transactions which are defined both by the
status of the parties and the nature of the transaction itself.” Hoffman v. Encore Capital Group,
Inc., No. L-1798-07, 2008 WL 5245306, at * 3 (N.J. Sup. Ct. App. Div. Dec 18, 2008) (citations
and quotations omitted). Goldmine cites to Morgan v. Air Brook Limousine, 510 A.2d 1197,
1205 (N.J. Super Ct. Law Div. 1986), a case in which the Superior Court of New Jersey
concluded that a franchise or business opportunity is covered by the CFA when it “is offered for
sale to the general public as any other merchandise is” and “[n]o special qualifications or
2

Under New Jersey law, a franchise is defined as a written agreement “in which a person grants to another a license
to use a trade name, trade mark, service mark or related characteristics, and in which there is a community of interest
in the marketing of goods or services at wholesale, retail, by lease, agreement, or otherwise.” N.J.S.A. § 56:10-3a.

6

experience are required except having sufficient funds for the down payment.” The Third
Circuit Court of Appeals and the New Jersey lower courts have disagreed over whether the
Supreme Court of New Jersey would adopt the reasoning in Morgan. In J & R Ice Cream Corp.
v. California Smoothie Licensing Corp., 31 F.3d 1259, 1274 (3d Cir. 1994), the Third Circuit
concluded that the CFA does not apply to distribution or franchise transactions, even where they
are available to the public at large, because those transactions involve the purchase of a business.
In Kavky v. Herbalife International of America., 820 A.2d 677, 680 (N.J. Super Ct. App. Div.
2003), the Appellate Division of the Superior Court of New Jersey noted its disagreement with J
& R Ice Cream, and held that small franchises and distributorships may be considered consumers
under the CFA when they are not covered by the New Jersey Franchise Practices Act (“FPA”)
and are offered to the general public. In so holding, the Kavky court noted that it did not
necessarily disagree with the result reached in J & R Ice Cream because the franchisee’s
agreement to operate a California Smoothie franchise in a Florida mall “appear[ed] to have
involved a substantial and complex commercial transaction, which likely fell within the
Franchise Practices Act.” Id. at 684.
Goldmine relies on Kavky to support its argument that, as a franchisee, it is protected as a
consumer by the CFA. However, application of the principles set forth in Kavky does not
support a finding that the parties entered into a franchise agreement that is suggestive of a
consumer transaction. In Kavky, the Appellate Division emphasized “[t]he importance of
interpreting the [CFA] to cover franchises that are not sufficiently substantial to come with the
Franchise Practices Act . . .” Id. at 684. The court specifically took into account whether the
franchises at issue were “too small” to meet the requirements of N.J.S.A § 56:10-4(2), which sets
forth that gross sale of products or services between the parties must exceed $35,000 for the 12-

7

month period immediately preceding the filing of the suit as a condition for application of the
FPA. Id. at 683 (adopting and following the court’s analysis in Morgan). Goldmine did not
include any allegations regarding the gross sales of Trollbeads products in its complaint.
However, Goldmine did allege that its actual sales of Trollbeads products were approximately
$597,000 in 2013, and that it was on pace for actual sales of approximately $369,500 in 2014
before the franchise was terminated. (Compl., DE # 1, at 3.) In this respect, the present case
involves a substantial transaction that stands in contrast to the franchise relationships in Morgan
and Kavky that have been recognized as consumer transactions by the New Jersey lower courts.
But cf. Pukar Int’l. Inc. v. Hallmark Retail, Inc., No. L-2087-10, 2011 WL 2713457, at * 6 (N.J.
Super. Ct. App. Div. July 14, 2011) (rejecting franchisee’s “assertion that absent a specific
waiver of its right to court access, the [arbitration] provision is unenforceable” because
“[franchisee] dealt with [franchisor] at arm’s length, its shareholders are business people and this
is a commercial business arrangement, not a consumer transaction”). Therefore, whether or not
the CFA applies to franchises in general, this particular franchise relationship is not a consumer
transaction covered by the CFA. Accordingly, the court finds that the Retailer Agreement’s
arbitration provision is not subject the disclosure requirements for waiver of a jury trial outlined
in Atalese.
Next, Goldmine contends that the arbitration provision is unenforceable because it is part
of a standardized contract that was not mutually negotiated by the parties. (Surreply, DE # 28, at
1-4.) In support of this argument, Goldmine relies on the Supreme Court of New Jersey’s
decision in Kubis & Perszyk Associates, Inc. v. Sun Microsystems, Inc., 680 A.2d 618, 627 (N.J.
1996), which held that a forum-selection clause in a franchise agreement that designated an outof-state judicial forum was presumptively invalid due to the “superior bargaining position” of a

8

franchisor. (Id. at 3.) It is true that “state law may affect the validity and enforceability of [an]
arbitration [agreement] to the extent that state law applies to ‘the revocation of any contract.’”
Doctor’s Assocs., Inc. v. Hamilton, 150 F.3d 157, 163 (2d Cir. 1998) (quoting 9 U.S.C. § 2).
However, the Supreme Court has found “nothing in the [FAA] indicating that the broad principle
of enforceability [of arbitration agreements] is subject to any additional limitations under state
law.” Southland Corp. v. Keating, 465 U.S. 1, 11 (1984). Thus, “in so far as Kubis can be said
to invalidate forum selection clauses in franchise agreements, . . . the FAA preempts such
invalidation.” Cohen v. Stratis Bus. Ctrs., Inc., No. 05-CV-1223(JLL), 2005 WL 3008807, at * 3
(D.N.J. Nov. 9, 2005) (citations omitted); see also Hamilton, 150 F.3d at 162 (“Kubis did not
establish a ‘generally applicable’ contract defense that applies to ‘any’ contract; it invalidated a
franchise agreement’s forum selection clause under the New Jersey Franchise Practices Act
because it required the franchisee to sue in another jurisdiction.”).
Although the arbitration provision at issue here is not presumptively invalid under Kubis,
Goldmine can still challenge the validity of the provision under basic contract principles. See
Doctor’s Assocs. v. Casarotto, 517 U.S. 681, 687 (1996) (noting “[g]enerally applicable contract
defenses, such as fraud, duress, or unconscionability, may be applied to invalidate arbitration
agreements without contravening [the FAA]”). Goldmine’s argument concerning the
standardized contract and the lack of mutual negotiation by the parties is one directed at the
Retailer Agreement’s adhesive nature. “A contract of adhesion . . . is a contract ‘presented on a
take-it-or-leave it basis, commonly in a standardized printed form without opportunity of the
‘adhering’ party to negotiate except perhaps on a few particulars.’” Martindale v. Sandvik, Inc.,
800 A.2d 872, 880 (N.J. 2002) (citation omitted). According to Goldmine, the Retailer
Agreement was drafted entirely by defendants with designated blanks for completion by each

9

“retailer.” (Surreply, DE # 28, at 2.) Goldmine further claims that it was required to sign the
Retailer Agreement in order to become a “retailer” of Trollbeads products, and that the
agreement was never counter-executed by defendants. (Id.) Given these circumstances, the
court assumes, without deciding, that the Retailer Agreement is an adhesion contract.
Under New Jersey law, “[t]he observation that a contract falls within the definition of a
contract of adhesion is not dispositive of the issue of enforceability.” Martindale, 800 A.2d at
880 (citation omitted). In determining whether an adhesion contract is enforceable, courts
consider not only to the standardized nature of the contract, but also “the subject matter of the
contract, the parties’ relative bargaining positions, the degree of economic compulsion
motivating the ‘adhering’ party, and the public interests affected by the contract.” Id. The
Supreme Court of New Jersey has generally focused on the fourth factor, the public interest, in
determining whether the terms of an adhesion contract should be enforced. See Delta Funding
Corp. v. Harris, 912 A.2d 104, 111 (N.J. 2006) (holding that even though the first three factors
“suggest a high level of procedural unconscionability,” these factors, did not, by themselves,
render the contract unenforceable). Therefore, “the observation that the [executed agreement]
fit[s] the definition of [a] contract[] of adhesion is the beginning, not the end, of the inquiry” and
the court “must determine as a matter of policy whether to enforce the unilaterally-fixed terms of
the [agreement].” Rudbart v. N. Jersey Dist. Water Supply Comm’n, 605 A.2d 681, 686 (N.J.
1992); see also Gras v. Assocs. First Capital Corp., 786 A.2d 886, 889 (N.J. Sup. Ct. App. Div.
2001) (“Significantly, the mere fact that a contract is adhesive does not render it unenforceable;
that issue must be determined as a matter of policy”.).
Here, defendants are a multi-national organization with franchises located throughout the
United States. Goldmine is a merchant with numerous years of experience operating a jewelry

10

store. Although Goldmine is an experienced business entity, defendants are undisputedly larger
and more sophisticated entities. Despite the disparate bargaining power between the parties,
Goldmine does not allege that there was a high degree of economic compulsion here or that it
was obligated to enter into a contract with defendants. Furthermore, Goldmine does not contend
that it would be against the public interest for the court to enforce the Retailer Agreement.
Therefore, after considering the factors articulated in Martindale, the court finds that the Retailer
Agreement is not unconscionable under New Jersey law.
In sum, the Retailer Agreement’s arbitration provision is neither unconscionable nor
invalid under New Jersey law. Because a valid agreement to arbitrate exists, the enforceability
of the arbitration provision depends on whether Goldmine’s claims fall within the scope of the
provision. As noted above, the arbitration provision requires arbitration of “any dispute arising
out of, or in connection with, the Agreement or regarding deliveries made under the Agreement .
. .” (See Ex. 1, DE # 18-1, ¶ 18.2) In its complaint, Goldmine asserts that all of its claims arise
out of the franchise/franchisee relationship between the parties, which was established by the
Retailer Agreement. (Compl., DE # 1, ¶¶ 70, 75, 87, 89, 97, 105.) Therefore, the claims asserted
in Goldmine’s complaint fall within the scope of the arbitration provision and are not for the
court to decide. Accordingly, the court will submit the case to binding arbitration.
Defendants have requested costs and disbursements incurred as a result of Goldmine’s
resistance to arbitration. Although the court has found in defendants’ favor, it cannot be said that
Goldmine’s motion was either without justification or patently frivolous. See Chauffeurs,
Teamsters & Helpers, Local Union No. 765 v. Stroehmann Bros. Co., 625 F.2d 1092, 1094 (3d
Cir. 1980) (noting that under the FAA, costs and fees are generally awarded if the defaulting
party acted without justification). Accordingly, defendants’ request for costs will be denied.

11

III. CONCLUSION
For the reasons stated herein, defendants’ motion to dismiss and compel arbitration, (DE
# 17), is GRANTED. Defendants’ request for costs and disbursements incurred in connection
with the instant motion is DENIED. Goldmine is ordered to arbitrate its claims against
defendants in accordance with the written agreement between the parties. The Clerk is
DIRECTED to enter judgment in favor of defendants and close this case.
This 6 March 2017.

__________________________________

W. Earl Britt
Senior U.S. District Judge

12