Polyone Corp. v. Westlake Vinyls, Inc.

• Decision Date: 15 January 2019
• Docket Number: CIVIL ACTION NO. 5:18-CV-107-TBR
• Citation: Polyone Corp. v. Westlake Vinyls, Inc., CIVIL ACTION NO. 5:18-CV-107-TBR (W.D. Ky. Jan 15, 2019)
• Parties: POLYONE CORPORATION, PLAINTIFF v. WESTLAKE VINYLS, INC., DEFENDANT
• Court: U.S. District Court — Western District of Kentucky

POLYONE CORPORATION, PLAINTIFF v. WESTLAKE VINYLS, INC., DEFENDANT

CIVIL ACTION NO. 5:18-CV-107-TBR

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF KENTUCKY AT PADUCAH

January 15, 2019

MEMORANDUM OPINION

This matter comes before the Court on Defendant Westlake Vinyls, Inc.'s Motion to Dismiss, [R. 35]. Plaintiff PolyOne Corporation responded, [R. 41], and Westlake replied, [R. 42]. Fully briefed, this matter is ripe for adjudication. For the reasons stated herein, Westlake's Motion to Dismiss, [R. 35], is GRANTED.

Background

The factual background and procedural history of this case is well known to the Court. Further detail concerning the relationship between these parties can be found in this Court's Memorandum Opinion in PolyOne Corporation v. Westlake Vinyls, Inc, No. 5:17-CV-157-TBR, 2018 WL 2437241 (W.D. Ky. May 30, 2018). In short, the ongoing dispute between the parties arises from the 2007 Settlement and Release Agreement ("2007 Settlement Agreement"), which contains the arbitration provision that is currently at issue. On October 31, 2017, PolyOne filed an Amended Complaint regarding arbitration of a different provision of the 2007 Settlement Agreement, and on May 30, 2018, this Court granted Westlake's Motion to Dismiss the matter. See id. The Court noted in its Memorandum Opinion, that PolyOne stated that it filed a Demand for Arbitration on May 19, 2017 and a Cross-Notice of Arbitration on or around September 19, 2017. Id. at *4-6.

On July 10, 2018, PolyOne filed a Complaint for Declaratory and Injunctive Relief and Petition to Enjoin Arbitration with this Court, [R. 1]. PolyOne pleaded that due to the Tenth Circuit's holding on February 6, 2018, in Citizen Potawatomi Nation v. Oklahoma, 881 F.3d 1226 (10th Cir. 2018), the arbitration provision of the 2007 Settlement Agreement is invalid. [Id.] PolyOne further noted in its Complaint that a seven-week arbitration hearing was scheduled to begin on August 6, 2018, in Louisville, Kentucky. [R. 1 at 2.] On the same day the Complaint was filed, PolyOne filed a Motion for Temporary Restraining Order, [R. 4], which was denied by this Court, [R. 38]. Thereafter, Westlake filed a Motion to Dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), which is currently before the Court.

Legal Standard

A complaint must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). In order to survive a motion to dismiss under Rule 12(b)(6), a party must "plead enough 'factual matter' to raise a 'plausible' inference of wrongdoing." 16630 Southfield Ltd. P'ship v. Flagstar Bank, F.S.B., 727 F.3d 502, 504 (6th Cir. 2013) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). A claim becomes plausible "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678 (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007)). When considering a Rule 12(b)(6) motion to dismiss, the Court must presume all of the factual allegations in the complaint are true and draw all reasonable inferences in favor of the non-moving party. Total Benefits Planning Agency, Inc., 552 F.3d at 434 (citing Great Lakes Steel, 716 F.2d at 1105). "The court need not, however, accept unwarranted factual inferences." Id. (citing Morgan v. Church's Fried Chicken, 829 F.2d 10, 12 (6th Cir. 1987)). Should the well-pleaded facts support no "more than the mere possibilityof misconduct," then dismissal is warranted. Iqbal, 556 U.S at 679. The Court may grant a motion to dismiss "only if, after drawing all reasonable inferences from the allegations in the complaint in favor of the plaintiff, the complaint still fails to allege a plausible theory of relief." Garceau v. City of Flint, 572 F. App'x. 369, 371 (6th Cir. 2014) (citing Iqbal, 556 U.S. at 677-79). The Court may properly consider documents as part of the pleadings if the document is "referred to in the complaint and is central to the plaintiff's claim." DBI Investments, LLC v. Blavin, 617 F. App'x 374, 376 (6th Cir. 2015) (quoting Greenberg v. Life Ins. Co. of Va., 177 F.3d 507, 514 (6th Cir.1999)). Furthermore, "[a] court that is ruling on a Rule 12(b)(6) motion may consider materials in addition to the complaint if such materials are public records or are otherwise appropriate for the taking of judicial notice." New England Health Care Employees Pension Fund v. Ernst & Young, LLP, 336 F.3d 495, 501 (6th Cir. 2003), holding modified by Merck & Co. v. Reynolds, 559 U.S. 633, 130 S. Ct. 1784, 176 L. Ed. 2d 582 (2010).

Discussion

A. The Waiver Issue

Although there is a fair amount of briefing between the parties, many of the arguments remain the same as they appeared in the briefs regarding PolyOne's Motion for Temporary Restraining Order and Preliminary Injunction, [R. 4; see also R. 26 (Westlake's Response to PolyOne's Motion for TRO)]. Westlake, once again, asserts that PolyOne's claim cannot succeed based on res judicata, the equitable doctrines of waiver and judicial estoppel, etc. The Court stands by its previous observation that PolyOne has waived the right to challenge the validity of the arbitration clause of the 2007 Settlement Agreement, [See R. 38 at 4].

"'[W]aiver is the intentional relinquishment or abandonment of a known right' leaving no correctable error in its wake." Williams v. Port Huron Sch. Dist., 455 F. App'x 612, 623 (6th Cir.2012) (Moore, J. dissenting) (quoting United States v. Olano, 507 U.S. 725, 733, 113 S.Ct. 1770, 123 L.Ed.2d 508 (1993)). "Waiver requires 'knowledge of the right and intent to waive that right, either by action or omission.'" CFE Racing Prod., Inc. v. BMF Wheels, Inc., 793 F.3d 571, 587 (6th Cir. 2015). Here, Westlake argues that PolyOne waived any right to challenge the validity of the arbitration clause of the 2007 Settlement Agreement by twice initiating arbitration against Westlake and allegedly conceding the validity of the arbitration agreement in the October 2017 lawsuit. [R. 35-6 at 26.] PolyOne retorts that it did not commit waiver because the basis for its objection to the arbitration provision comes from a recently decided case by the Tenth Circuit, i.e., Potawatomi. PolyOne believes that "the Potawatomi court made new law," therefore, its delay in objecting to Section 6 of the 2007 Agreement is justified. [R. 41 at 18.] The parties dispute whether the basis for PolyOne's argument actually derives from Potawatomi, or from the Supreme Court's holding in Hall St. Assocs., L.L.C. v. Mattel, Inc.,¹ decided in 2008—one year after the parties agreed to the 2007 Settlement Agreement.

B. Hall Street and Potawatomi

In Hall Street, the Supreme Court faced the question of "whether statutory grounds for prompt vacatur and modification may be supplemented by contract." 552 U.S. 576, 578 (2008). There, the two parties entered an arbitration agreement with the following provision:

[t]he United States District Court for the District of Oregon may enter judgment upon any award, either by confirming the award or by vacating, modifying or correcting the award. The Court shall vacate, modify or correct any award: (i) where the arbitrator's findings of facts are not supported by substantial evidence, or (ii) where the arbitrator's conclusions of law are erroneous.

Id. at 579. The Court held that "§§ 10 and 11² respectively provide the FAA's exclusive grounds for expedited vacatur and modification" rather than a contract provision that expands judicial review following arbitration. Id. at 584.

A decade later, in Potawatomi, the Tenth Circuit enforced the holding of Hall Street in a matter involving the arbitration provision within a Tribal-State gaming compact between Oklahoma and the Citizen Potawatomi Nation. The Tenth Circuit found that Hall Street made clear that the provision in the compact allowing for the de novo review by a federal district court of any arbitration award was invalid. Potawatomi, 881 F.3d at 1238. Thereafter, the court engaged in a severability analysis in which it adhered to federal contract principles and found that "[w]hen considered as a whole, Compact Part 12 makes clear that the parties' agreement to engage in binding arbitration was specifically conditioned on, and inextricably linked to, the availability of de novo review in federal court." Id. at 1239-40. Thus, the Tenth Circuit held thatthe arbitration provision of the compact was unenforceable and severable from the compact. Id. at 1241.

C. The Parties' Arguments Regarding Waiver

PolyOne asserts that, pursuant to Potawatomi, the arbitration provision of the 2007 Settlement Agreement is legally invalid, unenforceable, and severable from the 2007 Settlement Agreement. In its Motion to Dismiss, Westlake argues that PolyOne waived any right to challenge the validity of the arbitration clause by consistently showing its intent to arbitrate through "twice initiating arbitration against Westlake" and filing "the October 2017 Lawsuit regarding arbitrability . . .." [R. 35-6 at 26.]³ The Court agrees with Westlake. By initiating two different arbitrations and a lawsuit against Westlake, PolyOne abandoned the right to now claim that the arbitration clause was invalid all along. If PolyOne wished to object to the validity of the arbitration clause, it could have done so in 2008—a year after the agreement was formed—under the binding authority of the Supreme Court in Hall Street. Instead, both parties continued to pour time and resources of their own and of this Court into arbitration and litigation. Now, PolyOne wishes to object to the validity of the arbitration provision, not due to its negligence or ignorance of Hall Street, but because of a recent decision by a non-binding authority on this Court. Quite simply, if PolyOne wished to object to this arbitration agreement, it should have done so a decade ago.

In response to Westlake's assertion of waiver,...