Cambridge Towel Company Inc v. Zimmer America Corporation et al

Filing 45

ORDER granting 42 Motion to Compel Arbitration; granting 42 Motion to Stay Proceedings pending arbitration. Signed by Honorable G Ross Anderson, Jr on 9/9/15.(alew, )

UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH CAROLINA
SPARTANBURG DIVISION
Cambridge Towel Company, Inc.,

)
)
Plaintiff,
)
)
v.
)
)
Zimmer America Corporation, and
)
Juame Anglada Vinas, S.A.,
)
)
Defendants. )
________________________________ )

C/A No.: 7:14-cv-04089-GRA

ORDER
(Written Opinion)

This matter comes before the Court on Plaintiff, Cambridge Towel Company
Inc.’s (“Cambridge”), Motion to Compel Arbitration and Stay Proceedings pending
arbitration. ECF No. 42. This action involves claims by companies with international
locations and interests with regard to a piece of machinery used for the manufacture
and drying of towels. In June 2013, Cambridge purchased machinery from
Defendant, Juame Anglada Vinas, S.A. (“Anglada”), after “several visits to the
Anglada plant in Spain.” ECF No. 42. Cambridge specially ordered the machinery
from Anglada, which Anglada routed through its sales agent located in Spartanburg,
South Carolina, Defendant Zimmer America Corporation (“Zimmer”). ECF No. 42
Cambridge entered into a written agreement with Zimmer to complete the sale of the
machinery. ECF No. 42. Paragraph 8.1 of the written agreement states that “all
claims, disputes, and controversies arising out of or relating to this agreement…shall,
in lieu of court action, be submitted to arbitration” in Spartanburg, South Carolina.
ECF No. 42. Cambridge brought this lawsuit because it began experiencing
“countless problems [with the machinery] . . . almost from the beginning,” and

Page 1 of 5

Anglada refused to assist in remedying the purported issues. ECF No. 42. The sole
relief sought by Cambridge from this Court is an order compelling arbitration between
all parties as set forth in Paragraph 8.1 of the written agreement. ECF No. 42.
Defendant Zimmer filed a Response to this Motion, consenting to an order compelling
arbitration between all parties. ECF No. 43. Defendant Anglada failed to respond. For
the reasons set forth below, Plaintiff’s Motion to Compel Arbitration and Stay
Proceedings is GRANTED.

Analysis
A strong federal policy favors arbitration of disputes. In the words of the
Supreme Court, the Federal Arbitration Act (“FAA”) “establishes that, as a matter of
law, any doubts concerning the scope of arbitrable issues should be resolved in favor
of arbitration, whether the problem at hand is the construction of the contract
language itself or an allegation of waiver, delay, or a like defense to arbitrability.”
Mitsubishi Motors Corp. v. Selex Chrysler-Plymouth, 473 U.S. 164, 626 (1985).
In the Fourth Circuit, a litigant can compel arbitration under the FAA if he can
demonstrate “(1) the existence of a dispute between the parties; (2) a written
agreement that includes an arbitration provision which purports to cover the dispute;
(3) the relationship of the transaction, which is evidenced by the agreement, to
interstate and foreign commerce, and (4) the failure, neglect, or refusal of the
defendant to arbitrate the dispute.” Whiteside v. Telltech Corp., 940 F.2d 99, 102 (4th
Cir. 1991). Furthermore, the Fourth Circuit has repeatedly compelled arbitration
where, as here, the arbitration clause applies to any dispute “arising from or related

Page 2 of 5

to” the agreement. Long v. Silver, 248 F. 3d 309, 316 (4th Cir. 2001); Kvaerner ASA
v. Bank of Tokyo-Mitsubishi, Ltd., 210 F.3d 262, 265–66 (4th Cir. 2000); American
Recovery Corp. v. Computerized Thermal Imaging, Inc., 96 F.3d 88, 93 (4th Cir.
1996).
A dispute clearly exists between Cambridge and Anglada because Cambridge
asserts a claim against Anglada under the Uniform Commercial Code and the United
Nations Convention on Contracts for the International Sale of Goods (“CISG”). ECF
No. 32. Specifically, Cambridge alleges that, in arbitration, it will prove an agreement
between itself and Anglada to manufacture a “custom-designed machine meeting
certain performance specifications, and carrying certain warranties, which agreement
has been breached.” ECF No. 42. Moreover, a written agreement, including an
arbitration clause in Paragraph 8.1, exists covering “all claims, disputes, and
controversies” arising out of the sale of the machinery, and the sale of the machinery
clearly involves foreign commerce. ECF No. 42. Finally, Defendant Zimmer has
consented to arbitration between all of the parties; however, Defendant Anglada
failed to respond to the motion. ECF No. 43.
The next consideration for this Court is whether Anglada, a non-signatory to
the Cambridge - Zimmer contract, can be compelled to arbitration. The Fourth Circuit
has repeatedly recognized that non-signatories to an agreement containing an
arbitration clause may be compelled to arbitrate under several different legal tests.
See, e.g., Am. Bankers Ins. Group v. Long, 453 F.3d 623, 627 (4th Cir. 2006); R.J.
Griffin & Co. v. Beach Club II Homeowners Ass’n., 384 F.3d 157, 160 n.1 (4th Cir.
2004); Long v. Silver, 248 F.3d 309, 320 (4th Cir. 2001); Int’l Paper Co. v.

Page 3 of 5

Swabedissen Maschinen & Anlagen GMBH, 206 F.3d 411, 417 (4th Cir. 2000). In
these cases, the Fourth Circuit has established three different legal theories for
binding a non-signatory to arbitration: (1) the ‘inherently inseparable facts test; (2) the
‘control’ test; or (3) the ‘direct benefit’ test.
Applicable to this case is the direct benefit test, where courts have compelled
arbitration of non-signatories where the non-signatory seeks to derive a direct benefit
from an agreement containing a broad arbitration provision. Where such a benefit is
being sought, a non-signatory is estopped from refusing to comply with the arbitration
provision. See Am. Bankers, 453 F.3d at 628 (“[I]t is unfair for a party to rely on a
contract when it works to its advantage and repudiate it when it works to its
disadvantage.”); Schwabedissen, 206 F.3d at 417–18 (“In the arbitration context, the
doctrine [of equitable estoppel] recognizes that a party may be estopped from
asserting that the lack of his signature on a written contract precludes enforcement of
the contract’s arbitration clause when he has consistently maintained that other
provisions of the same contract should be enforced to benefit him.”)
Anglada derived a direct benefit from the written agreement between
Cambridge and Zimmer because Anglada profited from the initial sale and it collected
some of the payments due on the machinery directly from Cambridge. See ECF No.
42, Exhibits A & B. The principle of equitable estoppel compels the conclusion that
Anglada should be required to arbitrate the issues arising from the sale of the
machinery to Cambridge. Simply put, it would be inequitable to allow Anglada to reap
the benefits from the sale of its machinery, while simultaneously attempting to avoid
the terms of an arbitration provision contained therein. Accordingly, this Court

Page 4 of 5

believes that Defendants, Anglada and Zimmer, are bound by the arbitration provision
in the written agreement and thus compelled to arbitrate this dispute in Spartanburg,
South Carolina.
Conclusion
For all of the foregoing reasons, the Court finds the Defendants are bound by
the arbitration provision in the written agreement.
IT IS THEREFORE ORDERED that Plaintiff’s Motion to Stay Proceedings and
Motion to Compel Arbitration is GRANTED. This Court retains jurisdiction so that any
party may seek confirmation or enforcement of any arbitration decision.
IT IS SO ORDERED.

September 9, 2015
Anderson, South Carolina

Page 5 of 5