Eazy Elecs. & Tech., LLC v. LG Elecs., Inc.
| Decision Date | 30 December 2016 |
| Docket Number | CIVIL NO. 16–1830 (GAG) |
| Parties | EAZY ELECTRONICS & TECHNOLOGY, LLC, et al, Plaintiffs, v. LG ELECTRONICS, INC., et al, Defendants. |
| Court | U.S. District Court — District of Puerto Rico |
Miguel E. Gierbolini-Gierbolini, Gierbolini & Carroll, PSC, San Juan, PR, for Plaintiffs.
Alfredo F. Ramirez–MacDonald, O'Neill & Borges, San Juan, PR, for Defendants.
Eazy Electronics & Technology, LLC and Billy Medina–Torres (collectively "Plaintiffs") filed the present action against LG Electronics, Inc., LG Electronics Miami, Inc. and LG Electronics Panama, S.A. (collectively "Defendants") seeking the redress of injuries suffered as a result of the Defendants' alleged failure to abide by the terms of an agency contract entered into by the parties. (Docket No. 1.) Defendants responded requesting this Court to enter an order compelling arbitration pursuant to the Federal Arbitration Act, 9 U.S.C. §§ 1 –307 ("FAA"), given that the same contract which Plaintiffs allege that the Defendants have breached includes an arbitration clause that covers the claims set forth in the Complaint. (Docket No. 8.) After considering the parties' filings and applicable law, the Court GRANTS Defendants' Motion to Dismiss and Compel Arbitration at Docket No. 8.
Co–plaintiff Eazy Electronics & Technology, LLC ("Eazy Electronics") is a company headquartered in San Juan, Puerto Rico which offers repair services to manufacturers and distributors of electronic equipment. (Docket No. 1 ¶¶ 2, 9.) The company also sells electronic products to businesses in Puerto Rico's hospitality industry. Id. ¶ 10. Co–plaintiff Billy Medina–Torres is the principal officer of Eazy Electronics. Id. ¶ 12. Co–defendant LG Electronics, Inc. ("LG Electronics") is a corporation organized under the laws of the Republic of Korea with headquarters located in Seoul, South Korea. Id. ¶ 3. LG Electronics, Inc. is an affiliate of co-defendants LG Electronics Miami, Inc. ("LG Miami") and LG Electronics Panama, S.A. ("LG Panama"). Id. ¶¶ 3–5, 13 & 19.
Several years ago, Eazy Electronics and LG Electronics Alabama, Inc. ("LG Alabama") executed a service agreement under which Eazy Electronics would provide warranty services to customers of LG products in Puerto Rico. Id. ¶ 15. For approximately four years, Eazy Electronics claims to have enjoyed a mutually beneficial relationship with LG Alabama and LG USA, Inc. Id. ¶ 15. In 2012, the responsibilities related to the sale of LG products in Puerto Rico were transferred from LG Alabama to LG Miami. Id. ¶ 19.
Afterwards, officials from LG Electronics and LG Miami—seeking to grow their presence in Puerto Rico's market—contacted and met with Medina–Torres. Id. ¶¶ 20–22. Effective on June 10, 2012, LG Electronics, Inc. and Medina Torres—on behalf of Eazy Electronics—established a Non–Exclusive Agency Agreement ("Agency Agreement") where Eazy Electronics agreed to serve as LG Electronics, Inc.'s non-exclusive agent in Puerto Rico. (Docket 8–1 at 5, 21.) The stated purpose of the agreement was for Eazy Electronics to assist and promote LG Electronics, Inc.'s sales activities within Puerto Rico. Id. at 5.
On or about April of 2013, Eazy Electronics and LG Miami subscribed a Master Supply Agreement ("Supply Agreement") under which LG Miami would provide LG products to Eazy Electronics for resale in Puerto Rico. (Docket No. 1 ¶¶ 35–36.) Additionally, in July 2013, Eazy Electronics and LG Panama signed a Non–Exclusive Technical Service Agreement ("Service Agreement") where Eazy Electronics agreed to provide LG Panama the warranty and repair services that it previously provided for LG Alabama. Id. ¶ 37–38.
Plaintiffs filed the present suit on April 27, 2016. In the Complaint, Plaintiffs allege that they provided information related to Eazy Electronics' clients to representatives of LG Miami that directly resulted in new sales for LG Electronics and LG Miami. Id. ¶¶ 23, 30. Plaintiffs also claim that they provided leads and referrals that resulted in additional sales to Defendants. Id. ¶ 39. However, Plaintiffs allege that after they shared this information, and provided such leads and referrals, Defendants opted to sell directly to Eazy Electronics' clients without compensating Plaintiffs. Id. ¶ 41. Furthermore, Plaintiffs add that Defendants also hired a third party, POS Caribbean, to perform the warranty and repair services that Eazy Electronics provides. Id. ¶ 41.
Plaintiffs claim that these actions violate Puerto Rico's Sales Representative Act, P.R. LAWS ANN. tit. 10, §§ 279 –279h, and breach several contracts established between Defendants and Eazy Electronics. Id. ¶¶ 51, 52. Plaintiffs further add that Defendants caused them substantial damages by incurring in deceit, bad faith and breach of fiduciary duties in the performance of the Agency Agreement. Id. ¶ 58. Last, Plaintiffs assert that Defendants' employment of POS Caribbean tortuously interferes with Eazy Electronics' contractual rights. Id. ¶ 70.
Defendants filed a Motion to Dismiss and Compel Arbitration. (Docket No. 8.) They contend that the Agency Agreement contains a compulsory arbitration clause that applies to all of the Plaintiffs' claims. Id. ¶ 6. Defendants argue that the FAA and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, as adopted in Chapter Two of the FAA, 9 U.S.C. §§ 201 –208, require the enforcement of the arbitration clause that was contractually agreed upon by the parties. Defendants also assert that, even if the tortious interference claim presented by Plaintiffs is not covered by the arbitration clause in the Agency Agreement, this Court should dismiss the claim for failure to state a claim upon which relief may be granted and for failure to join a required party. Id. ¶ 23.
Plaintiffs opposed Defendant's motion, arguing that the arbitration clause contained in the Agency Agreement should not be enforced by this Court because it is contrary to the public policy recognized by the Puerto Rico Supreme Court in Unisys P.R., Inc. v. Ramallo Bros. Printing, Inc. , 128 D.P.R. 842 (1991). (Docket No. 11 at 2.) Plaintiffs also argue that the arbitration clause is unconscionable and thus invalid under the FAA. Id. at 5. Furthermore, they contend that the arbitration clause and the Agency Agreement's "waiver of discovery clause" infringe upon essential attributes of arbitration proceedings and should be invalidated by this Court for those reasons as well. Id. at 8.
Defendants replied, averring that the FAA preempts any state law or court decision inconsistent with its terms. (Docket No. 14 at 2.) Moreover, Defendants also assert that Plaintiffs' argument to the effect that the arbitration clause is unconscionable and invalid under the Federal Arbitration Act misconstrues applicable case law and does not represent a valid contractual defense under Puerto Rico law. Id.
Plaintiffs filed a sur-reply in which they rehashed the arguments presented in their opposition to the motion to dismiss and countered that unconscionability is a valid contractual defense under Puerto Rico law. (Docket No. 17 at 3.)
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. In order 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 may 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) ; Fed. R. Civ. P. 12(b)(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, 127 S.Ct. 1955, 1965, 167 L.Ed.2d 929 (2007). The court accepts as true all well-pleaded facts and draws all reasonable inferences in the plaintiff's 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, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009). "Threadbare recitals of the elements of a cause of action, supported by mere conclusory 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 mere possibility of misconduct, the complaint has alleged—but it has not ‘show[n]’—‘that the pleader is entitled to relief.’ " Iqbal , 129 S.Ct. at 1950 (quoting Fed.R.Civ.P. 8(a)(2) ).
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." Dialysis Access Ctr., LLC v. RMS Lifeline, Inc. , 638 F.3d 367, 375 (1st Cir. 2011) (quoting InterGen N.V. v. Grina , 344 F.3d 134, 142 (1st Cir. 2003) ).
Section two of the FAA provides that:
A written provision in ... a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of...
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