Crespo v. Matco Tools Corp.
Crespo v. Matco Tools Corp.
Opinion of the Court
OPINION AND ORDER
1 Daniel Crespo (“Crespo”) and Jannice Jusino Cruz (“Jusino”) (collectively “Plaintiffs”) filed the present action against Mateo Tools Corporation (“Mateo” or “Defendant”) seeking the redress of injuries suffered as a result of, the Defendant’s alleged breach of the parties’ distribution contract. (Docket Nos. 1; 8.) Defendant responded by moving to dismiss the complaint and compel arbitration pursuant to the Federal Arbitration Act, 9 U.S.C. §§ 1-16 (“FAA”), given that the distribution contract’s arbitration clause applies to Plaintiffs’ claims. (Docket No. 11.)
After considering the parties’ filings and applicable law, the Court GRANTS Defendant’s Motion to Dismiss and Compel Arbitration at Docket No. 11.
I. Relevant Factual & Procedural Background
Co-plaintiff Crespo is a citizen of Bay-amón, Puerto Rico. (Docket No. 8 ¶ 1.) Co-plaintiff Jusino is a citizen of Vega Baja, Puerto Rico. Id. ¶ 2. Defendant Mateo is a
On October 24, 2011, Plaintiffs entered into a Matco Tools Distributorship Agreement (“Agreement”) with Mateo. (Docket Nos. 8 ¶ 5; . 11 ¶ 5.) The Agreement appointed Plaintiffs as an authorized mobile distributor to sell and service Mateo’s product in a certain, exclusive, and specified geographic area within Puerto Rico. (Docket No. 8 ¶ 5.) Plaintiffs and Mateo also executed several other agreements, including a security agreement, a software agreement, a web page agreement, and agreements under which Plaintiffs could enter into purchase-security agreements with their customers and assign those agreements to Mateo. (Docket No. 11 ¶ 6.)
On March 30, 2016, and April 25, 2016, Plaintiffs sent notice of claim letters to Mateo, addressing Mateo’s alleged breach of its contractual allegations under the purchase security agreements, and challenging purported illegal and unwarranted charges against Plaintiffs. (Docket No. 8 ¶45.) Mateo responded on May 5, 2016, denying the allegations. Id. ¶ 46. A year later, on March. 9, Mateo sent Plaintiffs a Notice of Cause for Separation, citing an outstanding debt of $14,331.31 that would result in Plaintiffs’ termination if not paid on or before March 27, 2017. Id. ¶ 50. On or around March 27, 2017, Plaintiffs were separated and terminated as a distributor because of Plaintiffs’ failure to pay the amounts owed to Mateo. Id. ¶ 52.
Plaintiffs filed suit on March 24, 2017, alleging breach of contract, termination without just cause in violation of Puerto Rico’s Dealer’s Contract Law, P.R. Laws Ann., tit. 10, § 278 et seq., (“Law 75”), as well as compensatory and punitive damages pursuant to Article 1802 of the Puerto Rico Civil Code, P.R. Laws Ann., tit. 31, § 5139, (“Article 1802”). (Docket Nos. 1; 8.) In this Complaint, Plaintiffs argue that Mateo both overcharged and underpaid Plaintiffs over the course of their commercial relationship, causing Plaintiffs to default in their contractual obligations. (Docket No. 8 ¶¶ 49, 60.)
Plaintiffs maintain that Mateo, alleging irregularities like fraud and identity theft, would both “chargeback” credit from Plaintiffs’ purchase security ‘agreement (“PSA”) reserve and keep revenue meant for Plaintiffs’ operating purchase account (“OPA”). (Docket No. 8 ¶¶7,. 12, 25, 35, 37.) Plaintiffs assert that Mateo’s practices violated the terms of their Distributor’s Purchase Security Agreement Recourse Credit Assignment (“PSA-RCA”). (Docket No. 8 ¶ 7.) Plaintiffs further contend that Mateo’s behavior limited Plaintiffs’ purchase capacity, which reduced Plaintiffs’ inventory and negatively affected sale volumes. Id. ¶1¶ 32, 36.
Mateo filed a Motion to Dismiss and Compel Arbitration. (Docket Nos. 6; 11.) Mateo argues that the Agreement contains a compulsory arbitration clause that .applies to all of Plaintiffs’, claims. (Docket No. 11 ¶¶ 8-10.)- Mateo, asserts that Plaintiffs should be compelled to arbitrate all of their claims against Mateo because the claims fall within the scope of a written arbitration provision involving commerce, which satisfies one of the FAA’s requirements. Id, ¶¶ 4, 7. Mateo also claims that Plaintiffs’ allegations arose out of, and are connected to, the Agreement or alleged breaches of the same. Id. ¶ 9.
Plaintiffs opposed Mateo’s motion, arguing that, even if the Court finds the Agree
Mateo replied, averring that the Agreement indeed applies to Plaintiffs’ claims, as the Agreement’s scope “include[es] all exhibits and addenda.” (Docket Nos. 11-2 § 13.5; 19 at 3.) Mateo also contests Plaintiffs’ characterization of the exceptions in Section 12.5 of the Agreement, noting that Mateo sent Plaintiffs a ten-day notice— and in fact gave Plaintiffs eighteen days— to cure the failure to pay amounts owed under the Agreement. (Docket No. 19 at 4-5.) Mateo counters Plaintiffs’ waiver argument by specifying that there is no language in the Agreement that negates post-expiration arbitration. Id, at 5.
Plaintiffs sur-replied, restating arguments presented in their opposition to the motion to dismiss, and again disputing Mateo’s interpretation of the Agreement’s applicability to Plaintiffs’ present claims. (Docket No. 22.)
II. Standard of Review
Under the FAA, “[i]f suit is brought in a U.S: Court with regards to' a claim which according to an arbitration agreement should be referred to arbitration, the Court must, upon request to that effect by .one of the parties, stay the action until arbitration has concluded.” Sanchez-Santiago v. Guess, Inc., 512 F.Supp.2d 75, 78 (D.P.R. 2007); see also 9 U.S.C. § 3. To obtain an order compelling arbitration, the party seeking the order must establish “that a valid agreement to arbitrate exists, that the movant is entitled to invoke, the arbitration clause, that the other party is bound by that clause, and that the claim asserted comes within the clause’s scope.” InterGen N.V. v. Grina, 344 F.3d 134, 142 (1st Cir. 2003).
Under Rules 12(b)(1) and 12(b)(6), a defendant inay move to dismiss an ..action against him for lack of federal subject-matter jurisdiction or for failure to state a claim upon which relief can be granted. See Fed. R. Civ. P. 12(b)(1), (6). When considering a motion to dismiss, the court must decide whether the complaint alleges enough facts to “raise a right to relief above the speculative level.” See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). The court accepts as true all well-pleaded facts and draws all reasonable inferences in the plaintiffs favor. See id.; Parker v. Hurley, 514 F.3d 87, 90 (1st Cir. 2008). However, “the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). “Threadbare recitals - of the elements of a cause of action, supported by mere conclu-sory statements, do not suffice.” Id. (citing Twombly, 550 U.S. at 555, 127 S.Ct. 1955). “[W]here the well-pleaded facts do not permit the court to infer more than the
III. Discussion
Congress enacted the FAA in 1925 to overcome judicial resistance to arbitration. See AT & T Mobility LLC v. Concepcion, 563 U.S. 333, 339, 131 S.Ct. 1740, 179 L.Ed.2d 742 (2011); Colon Vazquez v. El San Juan Hotel & Casino, 483 F.Supp.2d 147, 150 (D.P.R. 2007). The FAA allows parties to an arbitrable dispute to avoid court and move into arbitration quickly and easily. See Colon Vazquez, 483 F.Supp.2d at 151 (quoting Southland Corp. v. Keating, 465 U.S. 1, 7, 104 S.Ct. 852, 79 L.Ed.2d 1 (1984)).
Section two of the FAA “articulates the national policy favoring arbitration and places arbitration agreements on equal footing with all other contracts.” Id. Section two of the FAA states as follows:
A written provision in ... a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract ... shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.
9 U.S.C. § 2.
Where a contract contains an arbitration clause, “there is a presumption of arbitrability in the sense that ‘[a]n order to arbitrate the particular grievance should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute.”’ Eazy Electronics & Tech., LLC v. LG Electronics, Inc., 226 F.Supp.3d 68, 73 (D.P.R. 2016) (Gelpí, J.) (citing AT & T Techs., Inc. v. Comm. Workers of Am., 475 U.S. 643, 650, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986)). The FAA leaves no room for district court discretion, instead “man-dat[ing] that district courts shall direct the parties to proceed to arbitration on issues as to which an arbitration agreement has been signed.” Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218, 105 S.Ct. 1238, 84 L.Ed.2d 158 (1985).
A party seeking to compel arbitration under the FAA must demonstrate “[1] that a valid agreement to arbitrate exists, [2] that the movant is entitled to invoke the arbitration clause, [3] that the other party is bound by that clause, and that [4] the claim asserted comes within the clause’s scope.” Eazy Electronics & Tech., LLC, 226 F.Supp.3d at 72-73 (citing Dialysis Access Ctr., LLC v. RMS Lifeline, Inc., 638 F.3d 367, 375 (1st Cir. 2011)).
In this case, the first factor, whether there is a valid arbitration clause, is not at issue. While the parties provide differing interpretations of the arbitration clause’s applicability, neither party contests the validity of the arbitration clause itself. See Dialysis Access Ctr., LLC, 638 F.3d at 383. The first factor is therefore met.
The second factor considers whether the movant is entitled to invoke the arbitration clause. Here, the Agreement provides that “all breaches, claims, disputes and controversies ... between the Distributor ... and Mateo ... will be determined exclusively by binding arbitration.” (Docket No. 11-2 § 12.1.) The Agreement does not limit the use of arbitration to either party, but rather allows both parties to use arbitration for dispute resolution. Consequently, the movant is entitled to invoke the arbitration clause.
The third factor addresses whether the other party is bound by the arbitration clause. Because arbitration is a matter of contract, a party “cannot be
Lastly, the fourth factor assesses whether a party’s claim falls within the scope of the arbitration clause. The parties agree that the Agreement’s arbitration clause applies to “all breaches, claims, disputes and controversies.” (Docket No. 11-2 § 12.1.) Plaintiffs, however, allege that a separate series of contracts, including a security agreement and a credit agreement, to name a few, which do not reference the Agreement’s broad arbitration language, govern their claim. Mateo insists on the all-encompassing nature of the Agreement, and argues that Plaintiffs’ distinction is meritless.
To determine the scope of the arbitration clause, the Court first considers the factual allegations underlying Plaintiffs’ claims in the Complaint. See Dialysis Access Ctr., LLC, 638 F.3d at 378; Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth Inc., 473 U.S. 614, 622 n.9, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985). Plaintiffs base their claim on Mateo’s allegedly illegal “chargebacks” and how these negatively affected Plaintiffs’ inventory and purchasing power. Mateo denies these claims and redirects Plaintiffs’ attention to the Agreement to resolve this dispute in arbitration.
Mateo’s practices during the parties’ relationship, though perhaps questionable, say nothing about the arbitration clause itself and whether Mateo fraudulently induced Plaintiffs to enter the Agreement. The First Circuit has established that
where the court is persuaded that ‘the parties’ arbitration agreement was validly formed and that it eover[s] the dispute in question and is legally enforceable,’ and that [it] is not otherwise subject to revocation ‘upon such grounds exist at law or in equity for the revocation of any contract,’ ... Section 2 of the FAA requires that the court submit the dispute' in question to arbitration.
Dialysis Access Ctr., LLC, 638 F.3d at 376 (quoting Granite Rock Co. v. Int’l Broth. of Teamsters, 561 U.S. 287, 300, 130 S.Ct. 2847, 177 L.Ed.2d 567 (2010); 9 U.S.C. § 2) (emphasis in original). Because both parties consented to the arbitration clause and Plaintiffs do not allege wrongdoing in the formation of the contract, there is no reason to nullify or refuse to enforce the arbitration clause’s breadth. Id. at 378. The scope of’ the arbitration clause is therefore as broad as the plain language of the Agreement implies.
In keeping with the federal pro-arbitration policy, “there is a presumption that ‘ambiguities as to the scope of the arbitration clause itself [must be] resolved in favor of arbitration.’ ” Id. at 379 (citing PowerShare, Inc. v. Syntel, Inc., 597 F.3d
Here, the terms of the arbitration clause are clear and specific. The parties agreed that “all breaches, claims, disputes and controversies” would be “determined exclusively by binding arbitration.” (Docket No. 11-2 § 12.1.) Therefore, Plaintiffs’ claims fall within the scope of the Agreement’s arbitration cláuse, which must be enforced according to the FAA.
IV. Conclusion
For the foregoing reasons, the Court GRANTS Defendant’s Motion to Dismiss and Compel Arbitration at Docket No. 11. Plaintiffs’ claims against Defendant are hereby DISMISSED, as the claims must proceed to arbitration.
SO ORDERED.
Reference
- Full Case Name
- Daniel CRESPO and Jannice Jusino Cruz v. MATCO TOOLS CORPORATION
- Cited By
- 3 cases
- Status
- Published