VOLKSWAGEN GROUP OF AMERICA, INC. v. SOUTHERN STATES VOLKSWAGEN, L.L.C.

Filing 13

MEMORANDUM ORDER ON MOTION FOR STAY. IT IS THEREFORE ORDERED that 8 Motion for Stay of Prosecution by Defendant Southern States Volkswagen, L.L.C. is DENIED. Signed by JUDGE THOMAS D. SCHROEDER on 4/21/2011. (Solomon, Dianne)

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
VOLKSWAGEN GROUP OF AMERICA, INC.

)
)
Plaintiff,
)
)
v.
)
)
SOUTHERN STATES VOLKSWAGEN, L.L.C. )
)
Defendant.
)

1:11CV29

MEMORANDUM ORDER ON MOTION FOR STAY
This matter is before the court on the Motion for Stay of
Prosecution

by

Defendant

(“Southern States”).

Southern

(Doc. 8.)

States

Volkswagen,

L.L.C.

Plaintiff Volkswagen Group of

America, Inc. (“Volkswagen”) has responded (Doc. 12), and the
time for further briefing has expired.

The motion is ripe for

decision.
Southern States moves pursuant to section 3 of the Federal
Arbitration Act (“FAA”), 9 U.S.C. § 3, to stay prosecution of
this

action

Volkswagen

“pending
Dealer

final

Agreement

arbitration
Standard

as

provided

Provisions”

in

the

(“Standard

Provisions”) entered into by the parties on February 16, 2001.
Specifically,

Southern

States

relies

on

Article

13(3),

which

states that, “[a]s an alternative to Article 13(2) above, upon
the written request of Dealer, a dispute arising in connection
with this Agreement will be submitted to binding arbitration.”

(Doc.

8-11.)

Southern

States

asserts

binding arbitration in writing.

that

it

has

requested

(Doc. 8 at 1; see Doc. 8-2

(letter from Southern States‟ counsel to Volkswagen).)
Volkswagen opposes the motion on two grounds.

First, it

argues that Article 13(1) of the Standard Provisions divides
disputes
arising

subject
under

to

arbitration

certain

into

enumerated

two

groups:

provisions

of

(1)

the

those

Standard

Provisions, for which arbitration is required; and (2) all other
disputes

arising

under

any

other

provision

of

the

Standard

Provisions, for which arbitration is required only when both
Southern States and Volkswagen agree to it.

The dispute in

question, Volkswagen asserts, does not fall within one of the
enumerated
cannot

provisions

be

submitted

and,
to

as

a

result,

arbitration

as

an

alternative

ground,

instant

without

agreement, which is specifically withheld.
Second,

the

dispute

Volkswagen‟s

(Doc. 12 at 2-4.)
Volkswagen

notes

that

Southern States failed to file a separate brief in support of
its motion for stay.

Volkswagen asserts that a motion for stay

of prosecution is not included in the list of motions in this
district‟s Local Rule 7.3(j), which exempts the requirement for
the filing of a separate brief and, as a result, the court
should

exercise

its

discretion

1

under

Local

Rule

7.3(k)

to

Exhibit A to the motion for stay (Doc. 8-1) contains an incomplete
version of the Standard Provisions. A complete version is provided in
Exhibit 2 to the complaint (see Doc. 1-2).

2

summarily deny the motion.

(Doc. 12 at 1-2, 4-5.)

Because the

court finds Volkswagen‟s first argument persuasive, it need not
reach the second, procedural argument.
Under the FAA, a court must stay “any suit or proceeding”
pending arbitration of “any issue referable to arbitration under
an agreement in writing for such arbitration.”

9 U.S.C. § 3.

The determination of the scope of an arbitration agreement is a
task of contract interpretation.

United States v. Bankers Ins.

Co., 245 F.3d 315, 319 (4th Cir. 2001).

Federal policy favors

arbitration, and courts are to resolve “any doubts concerning
the scope of arbitrable issues . . . in favor of arbitration[.]”
Moses H. Cone Mem‟l Hosp. v. Mercury Constr. Corp., 460 U.S. 1,
24-25 (1983); see Levin v. Alms & Assocs., Inc., 634 F.3d 260,
266 (4th Cir. 2011) (noting the Supreme Court has consistently
encouraged a “healthy regard for the federal policy favoring
arbitration”).
The

parties

accept

the

existence

of

agreement but disagree as to its scope.

an

arbitration

The Dealer Agreement

between the parties, which incorporates the Standard Provisions,
provides

that

the

contract

shall

be

Carolina law.

(Doc. 1-1 ¶¶ 2, 8)

policy,

Carolina

North

has

interpreted

under

North

Consistent with federal

expressed

“strong

utilizing arbitration to settle disputes.”

support

for

Hightower v. GMRI,

Inc., 272 F.3d 239, 242 (4th Cir. 2001) (citing Johnston Cnty.,
3

N.C. v. R.N. Rouse & Co., 331 N.C. 88, [91-92,] 414 S.E.2d 30,
32 (1992)).
The

FAA,

however,

makes

“arbitration

agreements

enforceable as other contracts, but not more so.”
Corp.

v.

(1967).

Flood

&

“[T]he

Conklin

Mfg.

Co.,

federal

policy

388

is

U.S.

simply

as

Prima Paint

395,
to

404

n.12

ensure

the

enforceability, according to their terms, of private agreements
to arbitrate.”

Volt Info. Scis., Inc. v. Bd. of Trs. of Leland

Stanford Junior Univ., 489 U.S. 468, 476 (1989); accord Sears
Roebuck & Co. v. Avery, 163 N.C. App. 207, 211, 593 S.E.2d 424,
428 (2004) (“As the United States Supreme Court has stressed,
„arbitration is simply a matter of contract between the parties;
it is a way to resolve those disputes – but only those disputes
–

that

the

parties

have

agreed

to

submit

to

arbitration.‟”

(quoting First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938,
943 (1995))).
Read in isolation, Article 13(3) suggests that a dealer
like

Southern

dispute.

The

collected

from

portions.

States

may

intention
the

demand
of

entire

the

binding
parties,

instrument

and

arbitration
however,
not

of

is

from

to

any
be

detached

Robbins v. C.W. Myers Trading Post, Inc., 253 N.C.

474, 477, 117 S.E.2d 438, 440-41 (1960) (noting that a contract
“must be construed as a whole” and all parts given effect if
possible

and

individual

clauses
4

read

in

context).

“[A]n

interpretation

which

gives

a

reasonable

meaning

to

all

provisions of a contract will be preferred to one which leaves a
portion of the writing useless or superfluous.”
v.

Corporex

Constructors,

Inc.,

96

N.C.

App.

Int‟l Paper Co.
312,

316,

385

S.E.2d 553, 556 (1989).
Articles

13(1)

through

(3)

of

the

Standard

Provisions

provide in relevant part:
Dispute Resolution
General Policy
(1)

[Volkswagen] and Dealer agree as a general
matter to work together to minimize disputes
between them.
While understanding that
certain
Federal
and
state
courts
and
agencies may be available to resolve any
disputes, [Volkswagen] and Dealer agree that
it is in their mutual best interests to
attempt to resolve certain controversies
first through arbitration. [Volkswagen] and
Dealer therefore agree that the dispute
resolution process outlined in this Article
shall be used before seeking legal redress
in
a
court
of
law
or
before
an
administrative agency, for all disputes
arising under the following: Article 9(3)
(Warranty
Procedures),
Article
12
(Succeeding
Dealers),
Article
14
(Termination),
Article
15
(Rights
and
Liabilities Upon Termination) and payments
to Dealer in connection with [Volkswagen’s]
incentive programs.
In the event that a
dispute arises in connection with any other
provision of this Agreement, [Volkswagen]
and Dealer may mutually agree to first
submit
the
dispute
to
arbitration,
in
accordance with the provisions of this
Article. Both [Volkswagen] and Dealer agree
that the ultimate mutual goal of arbitration
5

is to obtain a fair hearing and prompt
decision of the dispute, in an efficient and
cost-effective manner, and both agree to
work
toward
that
goal
at
all
times
hereunder.
Involuntary Non-Binding Arbitration
(2)

Upon
the
[Volkswagen]
connection
submitted to

written
request
of
either
or Dealer, a dispute arising in
with
this
Agreement
may
be
non-binding arbitration.

Voluntary Binding Arbitration
(3)

As an alternative to Article 13(2) above,
upon the written request of Dealer, a
dispute arising in connection with this
Agreement will be submitted to binding
arbitration.

(Doc. 8-1 at 21 (emphasis in original).)2
Reading the

quoted

provisions

as a whole, as the court

must, it is clear that as to any dispute arising under the
enumerated

Articles

referenced

in

Article

13(1),

non-binding

arbitration may be invoked upon the written request of either
party, but binding arbitration will be required if the Dealer
requests it in writing.

Otherwise, Article 13(1) makes clear

that, except for the enumerated disputes, arbitration may be
required only if both Volkswagen and Southern States agree to
arbitration.

The reference in Article 13(1) to “the dispute

resolution process outlined in this Article” includes Article
2

The remaining provisions of Article 13 address the rules of conduct
of arbitrations, the time for decision, provisional remedies, tolling
of applicable statutes of limitations, and the continuation of the
parties‟ obligations pending final resolution of any dispute.
(Doc.
8-1 at 21-22.)

6

13(3), upon which Southern States relies.
lawsuit

(or

a

portion

thereof)

disputes of Article 13(1),
play.

falls

Thus, unless this

within

the

enumerated

Article 13(3) does not come into

The parties are therefore free to proceed “in accordance

with the provisions of this Article,” but only following mutual
agreement.
Southern States‟ reading of the Standard Provisions would
result

in

Article

13(3)

overriding,

and

thus

superfluous, the specific language of Article 13(1).

rendering
Indeed,

such a reading would vitiate the clear directives of Article
13(1).

Cf. Levin, 634 F.3d at 267 (noting that whether one of

two provisions in a contract controls “is irrelevant where, as
here,

the

two

provisions

can

be

comfortably

read

together”

(citing Universal Concrete Prods. Corp. v. Turner Constr. Co.,
595 F.3d 527, 531 (4th Cir. 2010))).

Reading Article 13 as a

whole, the only reasonable interpretation of its provisions is
that argued by Volkswagen.
This

leaves

for

consideration

the

question

whether

the

complaint or any portion of it seeks relief based on one or more
of the enumerated disputes of Article 13(1) for which binding
arbitration may be required by a dealer.

Southern States does

not direct the court to any allegation in the complaint which
might fall within one of the areas enumerated in Article 13(1).
Volkswagen argues that the dispute arises under Article 6(2) of
7

the Standard Provisions, and Southern States does not dispute
this.
Upon

review

of

the

complaint,

the

court

agrees

with

Volkswagen that the dispute before it arises under Article 6(2)
of the Standard Provisions.

(See Doc. 1 ¶ 10.)

Count I of the

complaint alleges breach of contract and is expressly brought
pursuant to Article 6.
the same conduct.

Count II, unjust enrichment, is based on

(See id. at 5-7.)

The remaining count, Count

III, seeks related declaratory relief.

(Id. at 7-9.)

Because

Article 6(2) is not among the enumerated disputes set out in
Article

13(1),

unilateral

the

demand

of

instant

dispute

is

binding

arbitration

not
by

subject

Southern

to

a

States.

Consequently, a stay of prosecution is not warranted.
For the reasons stated above,
IT

IS

Prosecution

THEREFORE
by

ORDERED

Defendant

that

Southern

the
States

Motion

for

Stay

Volkswagen,

(Doc. 8) is DENIED.

/s/
Thomas D. Schroeder
United States District Judge
April 21, 2011

8

of

L.L.C.