SW Acquisition Co., Inc. v. Akzo Nobel Paints LLC et al
Filing
15
ORDER granting 8 defendant's Motion to Compel Arbitration. Signed by Judge Herman J. Weber on 4/23/14. (mb)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION
SW ACQUISITION CO., INC.,
Plaintiff
v.
Case No. 1:13-cv-785-HJW
AKZO NOBEL PAINTS LLC.
Defendant
ORDER
Pending is the defendant’s “Motion to Compel Arbitration and Dismiss
Proceedings” (doc. no. 8). Plaintiff opposes the motion, and the defendant has
replied. Having fully considered the record, including the pleadings, briefs, and
exhibits, the Court will grant the motion to compel arbitration and dismiss the
complaint without prejudice, for the following reasons:
I. Background
This case arises from a business deal between Miller Bros. Wallpaper
Company (“Miller Bros.”) and Akzo Nobel Paints LLC (“Akzo Nobel”). These
companies entered into a written agreement for Miller Bros. to be an authorized
dealer of Akzo Nobel products in southern Ohio and northern Kentucky. In
conjunction with that agreement, Miller Bros. purchased from Akzo Nobel certain
assets related to four stores in the Cincinnati, Dayton, and Covington areas, for a
total value of $784,791.33 (doc. no. 8-4 at 38, Valuation). The parties executed a
number of documents at the closing on September 25, 2009, including an Asset
Purchase Agreement, a promissory note, and an Authorized Dealer Agreement.
The latter document contains a broadly worded arbitration clause that expressly
Page 1 of 8
provides: “any controversy or claim arising out of or relating to this Agreement or
breach of this Agreement shall finally be settled by binding arbitration” (doc. no.
8-5, ¶ 21).
Several years later, Miller Bros. filed for bankruptcy on October 25, 2012
(S.D.Ohio Case No. 1:12-BK-15725). On January 31, 2013, SW Acquisitions Co.,
Inc. (“plaintiff”) purchased all the assets of Miller Bros. Plaintiff acknowledges
that it is the successor to Miller Bros. (doc. no. 11 at 2). Similarly, PPG
Architectural Finishes, Inc. is the successor-by-merger to PPG Architectural
Coatings, LLC (f.k.a. Akzo Nobel Paints LLC).
On September 30, 2013, plaintiff filed a civil complaint in the Hamilton
County Court of Common Pleas in Cincinnati, Ohio (doc. no. 3). In that complaint,
plaintiff sues Akzo Nobel for: 1) fraud (¶¶ 4-19), breach of contract (¶¶ 20-23), and
punitive damages (¶¶ 24-26).
Specifically, in the first cause of action (“fraud”), plaintiff complains that
Akzo Nobel withheld certain financial information and/or provided false
information, and that Miller Bros. was thereby “fraudulently induced” to enter into
the deal to purchase the assets of Akzo Nobel (¶¶ 15-17). Plaintiff complains that
“Akzo Nobel’s financials showed a store gross profit for the four stores
purchased of 39-43% but once Miller Bros. was requested by Akzo Nobel to sell
product at the same selling prices as Akzo Nobel previously sold, the gross profit
dropped to 13-20%” (¶ 19).
In its second cause of action (“breach of contract”), plaintiff alleges that
Miller Bros. and Akzo Nobel had expressly agreed that Miller Bros. would have
Page 2 of 8
“the exclusive right to sell Akzo Nobel products within a specified geographical
area as contained in the asset purchase agreement” (¶ 21). 1 Plaintiff complains
that although Akzo Nobel “guaranteed” Miller Bros. a profit percentage of 28% on
all goods sold, Akzo Nobel failed to deliver on the profit percentage guarantee
(doc. no. ¶ 23).
In its third “cause of action,” plaintiff seeks punitive damages because
Akzo Nobel allegedly “knowingly and intentionally” sold product directly to
customers in the protected dealership area of Miller Bros. (¶ 25). Plaintiff
contends that this “resulted in the bankruptcy of Miller Bros.” (¶ 26).
Defendant removed the case to federal court on October 30, 2013, based on
diversity jurisdiction pursuant to 28 U.S.C. § 1332(a) (doc. no. 1 at ¶¶ 4-7).
Defendant asserts that the plaintiff expressly agreed to resolve all disputes
through final and binding arbitration. Defendant has promptly sought to enforce
the arbitration clause and has moved to compel arbitration, which plaintiff
opposes. This matter is fully briefed and ripe for consideration.
II. Relevant Law
The Federal Arbitration Act, 9 U.S.C. § 1, et seq. (“FAA”) provides that a
party to an arbitration agreement, who is aggrieved by another party's refusal to
submit an arbitrable dispute to arbitration, may petition any federal district court
which would otherwise have jurisdiction over the underlying matter in order to
compel arbitration. 9 U.S.C. § 4. Section 2 of the FAA provides:
1
Although plaintiff refers to the “asset purchase agreement,” it was the
Authorized Dealer Agreement that gave Miller Bros. the dealership rights in the
Ohio/Kentucky region. Thus, the breach of contract claim is based on the
Authorized Dealer Agreement, which contains the express agreement to arbitrate.
Page 3 of 8
[A] written provision in any . . . contract evidencing a
transaction involving commerce to settle by arbitration a
controversy thereafter arising out of such contract or
transaction . . . shall be valid, irrevocable, and
enforceable, save upon such grounds as exists at law or
in equity for the revocation of any contract.
9 U.S.C. § 2. The primary purpose of the FAA is to ensure “that private
agreements to arbitrate are enforced according to their terms.” Volt Info.
Sciences, Inc. v. Bd. of Tr. of Leland Stanford, Jr. Univ., 489 U.S. 468, 479 (1989).
“The FAA was designed to override judicial reluctance to enforce arbitration
agreements, to relieve court congestion, and to provide parties with a speedier
and less costly alternative to litigation.” Deck v. Miami Jacobs Business College
Co., 2013 WL 394875, *2 (S.D.Ohio 2013) (J. Black). Courts examine “arbitration
language in a contract in light of the strong federal policy in favor of arbitration,
resolving any doubts as to the parties' intentions in favor of arbitration.” Hurley v.
Deutsche Bank Trust Co. Americas, 610 F.3d 334, 338 (6th Cir. 2010); Great Earth
Cos., Inc. v. Simons, 288 F.3d 878, 889 (6th Cir. 2002).
When considering whether to compel arbitration under the FAA, a court will
consider: (1) whether the parties agreed to arbitrate; and (2) the scope of the
arbitration agreement. Stout v. J.D. Byrider, 228 F.3d 709, 714 (6th Cir. 2000), cert.
denied, 531 U.S. 1148 (2001); see also, Javitch v. First Union Sec., Inc., 315 F.3d
619, 624 (6th Cir. 2003) (“Before compelling an unwilling party to arbitrate, the
court must engage in a limited review to determine whether the dispute is
arbitrable; meaning that a valid agreement to arbitrate exists between the parties
and that the specific dispute falls within the substantive scope of that
agreement.”). No federal statutory claims are asserted here.
Page 4 of 8
III. Discussion
A. The Arbitration Clause and its Scope
The Authorized Dealer Agreement, by its express terms, broadly provides
that “[a]ny controversy or claim arising out of or relating to this Agreement or
breach of this Agreement shall finally be settled by binding arbitration before a
single arbitrator… who will be jointly appointed by the Parties” (doc. no. 8-5, ¶
21). Plaintiff concedes that the breach of contract claim for violation of the
Authorized Dealer Agreement is subject to arbitration. The punitive damages
claim is also subject to arbitration because it “arises from” or “relates to” the
Authorized Dealer Agreement, i.e. plaintiff alleges the defendant sold Akzo Nobel
products directly to customers in Miller Bros.’ protected dealership area.
With respect to the fraud claim, plaintiff urges that this claim is based on
the Asset Purchase Agreement. Plaintiff contends that such agreement is
separate and not subject to arbitration because it contains no arbitration
provision separate from the clause in the Authorized Dealer Agreement (doc. no.
11 at 3). Plaintiff concedes that the breach of contract/punitive damage claims for
violation of the Authorized Dealer Agreement are subject to arbitration and that
“those claims are interwoven with the [alleged] fraud related to the Asset
Purchase Agreement” (doc. no. 11 at 5-6).
Defendant points out that the Asset Purchase Agreement and Authorized
Dealer Agreement are two integral parts of the same business deal that was
consummated on the same day. Defendant points out that even Miller Bros.’s own
board resolution on September 25, 2009 expressly refers to both documents and
Page 5 of 8
authorizes officers of the corporation “to effect the consummation of the
transactions contemplated thereby, and to carry out fully the intent and to
accomplish the purposes thereof” (doc. no. 12 at 2, fn. 1). The documents were
executed together on the same date. Defendant correctly asserts that “the Asset
Purchase
Agreement
and
the
Authorized
Dealer
Agreement
were
two
interconnected and necessary pieces of the same deal” (doc. no. 12 at 3). As for
the fraud claim, plaintiff’s own complaint reflects that such claim complains of
the level of profitability of the Akzo Nobel product sold at the four stores, an
issue that certainly “relates to” the parties’ agreement to sell Akzo Nobel
products at those stores as a regional dealer.
Whether an arbitration agreement requires arbitration of a particular
dispute is a matter of contract interpretation. Brinkerhoff v. v. Zachry Const.
Corp., 2005 WL 1661693, *5 (S.D.Ohio) (citing Atkinson v. Sinclair Refining Co.,
370 U.S. 238, 242 (1962)). All of the plaintiff’s claims in this action are within the
scope of the arbitration clause because they “relate to” the Authorized Dealer
Agreement. “If the matter at issue can be construed as within the scope of the
arbitration agreement, it should be so construed unless the matter is expressly
exempted from arbitration by the contract terms.” Simon v. Pfizer, Inc., 398 F.3d
765, 773 n. 12 (6th Cir. 2005). “[A]ny doubts concerning the scope of arbitrable
issues should be resolved in favor of arbitration.” Moses H. Cone Memorial Hosp.
v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983); Gilmer v. Interstate/Johnson
Lane Corp., 500 U.S. 20, 26 (1991) (having made the bargain to arbitrate, the party
should be held to it”). In sum, a valid agreement to arbitrate exists between the
Page 6 of 8
parties and the specific disputes raised in the complaint fall within the
substantive scope of that agreement to arbitrate. Plaintiff’s claims are all subject
to binding arbitration.
B. Whether to Stay or Dismiss
Where claims are referred to arbitration, the FAA provides for a stay of the
court proceedings “until such arbitration has been had in accordance with the
terms of the agreement.” 9 U.S.C. § 3. In cases, such as the present one, where all
the claims are subject to final and binding arbitration, courts may properly
dismiss the complaint. See Knall Beverage, Inc. v. Teamsters Local Union No. 293
Pens. Plan, 744 F.3d 419, 421 (6th Cir. 2014) (holding that district court “properly
dismissed the case without prejudice” after ordering arbitration); Arnold v.
Arnold Corp., 920 F.2d 1269, 1275 (6th Cir. 1990) (holding it was not “error for the
district court to dismiss the complaint” after ordering arbitration); Ozormoor v. v.
T-Mobile USA, Inc., 354 Fed.Appx. 972, 974-75 (6th Cir. 2009) (affirming the district
court's order compelling arbitration and dismissing the complaint).
“The weight of authority clearly supports dismissal of the case when all of
the issues raised in the district court must be submitted to arbitration.” Green v.
Ameritech Corp., 200 F.3d 967, 973 (6th Cir. 2000) (quoting Alford v. Dean Witter
Reynolds, Inc., 975 F.2d 1161, 1164 (5th Cir. 1992)). “Most district courts in this
circuit agree that the best procedure for enforcing arbitration agreements is to
dismiss the court action without prejudice.” Gilchrist v. Inpatient Med. Services,
Inc., 2010 WL 3326742, *5 (N.D.Ohio) (quoting Nestle Waters N. Am., Inc. v.
Bollman, 2006 WL 3690804, at *6 (W.D.Mich. 2006), affirmed, 505 F.3d 498 (6th Cir.
Page 7 of 8
2007)); Hensel v. Cargill, Inc., 198 F.3d 245, 1999 WL 993775, at *4 (6th Cir. 1999)
(“litigation in which all claims are referred to arbitration may be dismissed”).
Given that all of the plaintiffs’ claims are subject to binding arbitration, the Court
will dismiss this case without prejudice. 2
IV. Oral Argument Not Warranted
Local Rule 7.1(b)(2) provides that courts have discretion whether to grant
requests for oral argument. The parties have fully briefed the relevant issues. The
Court finds that the pleadings and exhibits are clear on their face, and that oral
argument is not warranted. Yamaha Corp. of Am. v. Stonecipher’s Baldwin Pianos
& Organs, 975 F.2d 300, 301-02 (6th Cir. 1992); Schentur v. U.S., 4 F.3d 994, 1993
WL 330640 at *15 (6th Cir. (Ohio)) (observing that district courts may dispense
with oral argument on motions for any number of sound judicial reasons).
Accordingly, the defendant’s “Motion to Compel Arbitration” (doc. no. 7) is
GRANTED; the parties shall arbitrate the issues presented in this case; and this
case is DISMISSED without prejudice.
IT IS SO ORDERED.
s/Herman J. Weber
Herman J. Weber, Senior Judge
United States District Court
2
In the last sentence of its response, plaintiff suggests that it be permitted to
amend its claims for fraud and punitive damages. See La Sch. Employees. Ret.
Sys. v. Ernst & Young, LLP, 622 F.3d 471, 486 (6th Cir. 2010) (observing that such
a request “almost as an aside, to the district court in a memorandum in
opposition to the defendant's motion to dismiss is ... not a motion to amend”);
Begala v. PNC Bank, Ohio, Nat'l Ass'n, 214 F.3d 776, 784 (6th Cir. 2000), cert.
denied, 531 U.S. 1145 (2001) (same).
Page 8 of 8
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?