Optical Mechanics, Inc. v. Cymbioms Corp., Case No.: GJH-20-1947

CourtUnited States District Courts. 4th Circuit. United States District Court (Maryland)
Writing for the CourtGEORGE J. HAZEL United States District Judge
PartiesOPTICAL MECHANICS, INC., Plaintiff/Counter-Defendant, v. CYMBIOMS CORPORATION, Defendant/Counter-Plaintiff.
Docket NumberCase No.: GJH-20-1947
Decision Date09 February 2021

OPTICAL MECHANICS, INC., Plaintiff/Counter-Defendant,
v.
CYMBIOMS CORPORATION, Defendant/Counter-Plaintiff.

Case No.: GJH-20-1947

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND Southern Division

February 9, 2021


MEMORANDUM OPINION

Plaintiff/Counter-Defendant Optical Mechanics, Inc. ("OMI"), brought this action against Defendant/Counter-Plaintiff Cybioms Corporation ("Cybioms") alleging breach of contract, quantum meruit, and unjust enrichment. ECF No. 1. Cybioms has asserted a counterclaim for breach of contract against OMI. ECF No. 10. Now pending before the Court is OMI's Motion to Compel Arbitration and Dismiss this Action. ECF No. 6. No hearing is necessary. Loc. R. 105.6 (D. Md. 2018). For the following reasons, OMI's Motion to Compel and Dismiss is granted, in part, and denied, in part.

I. BACKGROUND1

Cybioms was the prime contractor under a prime contract with the President of India for a project involving the construction and installation of satellite photometry and laser range systems (the "Project"). ECF No. 1 ¶ 5. On November 8, 2010, Cybioms entered into a subcontract (the "India Subcontract") with OMI in which OMI agreed to act as an independent

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contractor to Cybioms for the construction and installation of photometry subsystems in connection with the Project. Id. ¶ 6. OMI alleges that the Project was delayed due to the site being unprepared but does not state when the Project was completed. Id. ¶ 9. OMI further alleges that it performed all conditions, covenants, and promises required of it under the India Subcontract—and that the President of India executed a final acceptance certificate for the Project and provided Cybioms final payment under the prime contract—but Cybioms breached the India Subcontract by failing to make payments, paying OMI only $1,045,705.10 of the $2,312,375.60 total contract value. Id. ¶¶ 8-11.

OMI filed a Complaint in this Court on June 30, 2020. ECF No. 1. On August 4, 2020, Cybioms filed an Answer, Defenses, Counterclaim, and Jury Demand. ECF No. 5. OMI filed an Answer to Cybioms' Counterclaim on August 20, 2020. ECF No. 9. Cybioms then filed an Amended Answer and Counterclaim on August 21, 2020. ECF No. 10. Finally, OMI filed an Answer to Cybioms' Amended Counterclaim on September 2, 2020. ECF No. 13.

In its Amended Answer and Counterclaim, Cybioms asserted a breach of contract counterclaim against OMI, alleging that OMI was a subcontractor on multiple subcontracts and purchase orders for the provision of advanced telescope domes, equipment, software, and installation and support services to customers of Cybioms—including the government or President of India as well as a customer in Finland (the "Finland Subcontract")—but that OMI either failed to deliver goods or delivered faulty or defective goods. Id. at 14-35. Cybioms further alleged that OMI anticipatorily breached these subcontracts by going out of business, shutting down operations, and announcing and declaring its insolvency. Id. at 33-35.

On August 5, 2020, one day after Cybioms filed its initial Answer and Counterclaim, OMI filed a Motion to Compel Arbitration and Dismiss this Action. ECF No. 6. According to

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OMI, the India Subcontract contained an agreement to arbitrate any disputes arising out of or in connection with the Subcontract.2 ECF No. 6-1 at 2. Specifically, Subcontract Clause 29, titled "Settlement of Disputes," states:

Any disputes or differences including those considered as such by only one of the PARTIES arising out of or in connection with this SUBCONTRACT shall be, to the extent possible, settled amicably between PARTIES. If amicable settlement cannot be reached, then all disputes shall be settled by arbitration as defined in Clause-30.

ECF No. 6-1 at 23. Subcontract Clause 30, titled "Arbitration," states:

In the event of any CONTRACTOR'S dispute or difference arising out of or in connection with this SUBCONTRACT, then the same shall be settled amicably by mutual consultation or through the good offices of the Agencies of the respective State Governments. If such resolution is not possible, then the unresolved dispute or difference shall be referred to the Sole Arbitration by a person appointed by the Maryland Chamber of Commerce. The decision of the Arbitrator shall be final and binding upon the Parties and the expenses of the arbitration shall be paid as may be determined by the Arbitrator.

Id. at 23-24. The words "Agencies," "State Governments," and "Sole Arbitration" in Clause 30 are capitalized, but they are not defined in the Subcontract. See ECF No. 6-1 at 2 n.1; Id. at 11-12. Additionally, according to OMI, upon information and belief, the Maryland Chamber of Commerce does not offer arbitration services. ECF No. 6-1 at 2 n.1.

Cybioms filed a Response in Opposition to OMI's Motion to Compel on August 25, 2020. ECF. No. 11. OMI replied on September 8, 2020. ECF No. 14.

II. STANDARD OF REVIEW

The Federal Arbitration Act ("FAA"), 9 U.S.C. §§ 1-16, "represents 'a liberal federal policy favoring arbitration agreements.'" Murray v. United Food & Commercial Workers Intll Union, 289 F.3d 297, 301 (4th Cir. 2002) (quoting Moses H. Cone Mem'l Hosp. v. Mercury

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Constr. Corp., 460 U.S. 1, 24-25 (1983)). "The strength of this well-established policy favoring the enforcement of valid arbitration agreements, however, does not end our inquiry." Id. at 302. "[E]ven though arbitration has a favored place, there still must be an underlying agreement between the parties to arbitrate." Adkins, 303 F.3d at 501 (quoting Arrants v. Buck, 130 F.3d 636, 640 (4th Cir. 1997)). Accordingly, before compelling an unwilling party to arbitration, a court must "engage in a limited review to ensure that the dispute is arbitrable—i.e., that a valid agreement to arbitrate exists between the parties and that the specific dispute falls within the substantive scope of that agreement." Murray, 289 F.3d at 302 (quoting Hooters of Am., Inc. v. Phillips, 173 F.3d 933, 937 (4th Cir. 1999)).

A litigant may compel arbitration under the Federal Arbitration Act (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 or foreign commerce, and (4) the failure, neglect or refusal of the defendant to arbitrate the dispute." Adkins v. Labor Ready, Inc., 303 F.3d 496, 500-01 (4th Cir. 2002) (quoting Whiteside v. Teltech Corp., 940 F.2d 99, 102 (4th Cir. 1991)); see also 9 U.S.C. § 2 ("[A]n agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract."). Regarding the second element, "[w]hether a party agreed to arbitrate a particular dispute is an issue for judicial determination to be decided as a matter of contract." Johnson v. Circuit City Stores, 148 F.3d 373, 377 (4th Cir. 1998) (citing AT & T Techs., Inc. v. Commc'ns Workers of Am., 475 U.S. 643, 648-49 (1986)); Chorley Enters., Inc. v. Dickey's Barbecue Rests., Inc., 807 F.3d 553, 563 (4th Cir. 2015), cert. denied, 136 S. Ct. 1656 (2016) (finding

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courts compel arbitration "if (i) the parties have entered into a valid agreement to arbitrate, and (ii) the dispute in question falls within the scope of the arbitration agreement"). The Court must, however, "avoid reaching the merits of arbitrable issues." Id. 939 n.9 (citing Drivers, Chauffeurs, etc. v. Akers Motor Lines, 582 F.2d 1336, 1342 (4th Cir. 1978)).

Where the parties dispute the validity of an arbitration agreement, "[m]otions to compel arbitration . . . are treated as motions for summary judgment." Rose v. New Day Fin., LLC, 816 F. Supp. 2d 245, 251 (D. Md. 2011). Therefore, such motions "shall [be] grant[ed] . . . if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). In considering the motion, "the judge's function is not . . . to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). Moreover, the Court must "view the evidence in the light most favorable to . . . the nonmovant, and draw all reasonable inferences in h[is] favor," Dennis v. Columbia Colleton Med. Ctr., Inc., 290 F.3d 639, 645 (4th Cir. 2002), but it also must abide by the "affirmative obligation of the trial judge to prevent factually unsupported claims and defenses from proceeding to trial," Bouchat v. Balt. Ravens Football Club, Inc., 346 F.3d 514, 526 (4th Cir. 2003) (quoting Drewitt v. Pratt, 999 F.2d 774, 778-79 (4th Cir. 1993)).

III. DISCUSSION

The FAA operates to enforce an arbitration provision included in "a contract evidencing a transaction involving commerce." 9 U.S.C. § 2. The Supreme Court has interpreted this provision to "signal[] an intent to exercise Congress' commerce power to the full," Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 271 (1995), covering a transaction that, in fact, involves

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interstate commerce even if the parties did not contemplate it as such at the time of the agreement, id. at 281.

Here, the agreement is not only one between parties located in different states—OMI is an Iowa corporation while Cybioms is a Delaware corporation with a principal place of business located in Maryland, ECF No. 1 ¶ 1-2; ECF No. 10-1 at 2—but also the purchaser in the overall contract is the President of India, and the agreement requires the subcontractor to supply, install, and test goods at Ponmudi and Mount Abu, India, see ECF No. 6-1 at 11, 13, 17. Thus, "[t]he interstate nature of the transaction is apparent." Marroquin v. Dan Ryan Builders Mid-Atl., LL...

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