Crespo v. Matco Tools Corp.

• Decision Date: 15 August 2017
• Docket Number: CIVIL NO. 17–1394 (GAG)
• Citation: 274 F.Supp.3d 15
• Parties: Daniel CRESPO and Jannice Jusino Cruz, Plaintiffs, v. MATCO TOOLS CORPORATION, Defendant.
• Court: U.S. District Court — District of Puerto Rico

274 F.Supp.3d 15

Daniel CRESPO and Jannice Jusino Cruz, Plaintiffs,

v.MATCO TOOLS CORPORATION, Defendant.

CIVIL NO. 17–1394 (GAG)

United States District Court, D. Puerto Rico.

Signed August 15, 2017

Wilbert Mendez–Marrero, San Juan, PR, for Plaintiffs.

Raul M. Arias–Marxuach, McConnell Valdes, LLC, San Juan, PR, for Defendant.

OPINION AND ORDER

GUSTAVO A. GELPI, United States District Judge

Daniel Crespo ("Crespo") and Jannice Jusino Cruz ("Jusino") (collectively "Plaintiffs") filed the present action against Matco Tools Corporation ("Matco" 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 Bayamón, Puerto Rico. (Docket No. 8 ¶ 1.) Co-plaintiff Jusino is a citizen of Vega Baja, Puerto Rico. Id. ¶ 2. Defendant Matco is a Delaware corporation with its principal place of business in Stow, Ohio. (Docket No. 11 ¶ 3.) Matco manufactures and sells high precision automotive tools, accessories, and equipment. (Docket Nos. 8 ¶ 3; 11 ¶¶ 2–3.) Although Matco does not have any manufacturing facilities in Puerto Rico, it is active in all fifty U.S. states, as well as in Puerto Rico. (Docket No. 11 ¶¶ 3–4.)

On October 24, 2011, Plaintiffs entered into a Matco Tools Distributorship Agreement ("Agreement") with Matco. (Docket Nos. 8 ¶ 5; 11 ¶ 5.) The Agreement appointed Plaintiffs as an authorized mobile distributor to sell and service Matco's product in a certain, exclusive, and specified geographic area within Puerto Rico. (Docket No. 8 ¶ 5.) Plaintiffs and Matco 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 Matco. (Docket No. 11 ¶ 6.)

On March 30, 2016, and April 25, 2016, Plaintiffs sent notice of claim letters to Matco, addressing Matco'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.) Matco responded on May 5, 2016, denying the allegations. Id. ¶ 46. A year later, on March 9, Matco 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 Matco. 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 Matco 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 Matco, 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 Matco'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 Matco's behavior limited Plaintiffs' purchase capacity, which reduced Plaintiffs' inventory and negatively affected sale volumes. Id. ¶¶ 32, 36.

Matco filed a Motion to Dismiss and Compel Arbitration. (Docket Nos. 6; 11.) Matco argues that the Agreement contains a compulsory arbitration clause that applies to all of Plaintiffs' claims. (Docket No. 11 ¶¶ 8–10.) Matco asserts that Plaintiffs should be compelled to arbitrate all of their claims against Matco 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. Matco also claims that Plaintiffs' allegations arose out of, and are connected to, the Agreement or alleged breaches of the same. Id. ¶ 9.

Plaintiffs opposed Matco's motion, arguing that, even if the Court finds the Agreement to govern, arbitration would not be appropriate because their claims fall into one of the Agreement's exceptions to arbitration. (Docket No. 16 at 12.) Specifically, Plaintiffs contend that Section 12.5 of the Agreement, which lists some disputes that are not subject to arbitration, includes "any dispute or controversy involving immediate termination of this Agreement by Matco pursuant to 11.4 [of] this Agreement." (Docket Nos. 11–2 §§ 11.4, 12.5; 16 at 12.) Thus, Plaintiffs claim that this Court should deny Matco's motion because Plaintiffs' termination triggers an exception to arbitration listed in the Agreement. (Docket No. 16 at 13.) Alternatively, Plaintiffs add that their dispute instead falls within the scope of other contracts between the parties that do not invoke the Agreement's arbitration terms. Id. Plaintiffs also argue that, by immediately terminating its relationship with Plaintiffs, Matco waived any right to arbitration. Id. at 15.

Matco 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.) Matco also contests Plaintiffs' characterization of the exceptions in Section 12.5 of the Agreement, noting that Matco 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.) Matco 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 Matco'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 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), (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 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, 678, 129 S.Ct. 1937, 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, 556 U.S. at 679, 129 S.Ct. 1937 (quoting FED. R. CIV. P. 8(a)(2) ).

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 JuanHotel & 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...