Rock v. Solar Rating & Certification Corp.
| Decision Date | 23 July 2018 |
| Docket Number | Case No. 8:17-cv-3401-DCC-JDA |
| Court | U.S. District Court — District of South Carolina |
| Parties | Michael C. Rock, individually and as successor by dissolution to K-Cor, Inc., Plaintiff, v. Solar Rating & Certification Corporation, Defendant. |
This matter is before the Court on a motion to dismiss and to compel arbitration filed by Defendant Solar Rating & Certification Corporation ("SRCC"). [Doc. 7.] On May 10, 2018, the Honorable Donald C. Coggins, Jr., referred the motion to the undersigned magistrate judge [Doc. 15], who is authorized to review the motion and to provide a report and recommendation to the District Court.
Plaintiff commenced this action by filing a Complaint in the Anderson County Court of Common Pleas on September 22, 2017, alleging that SRCC breached its contract with Plaintiff. [Doc. 1-1.] Thereafter, SRCC removed the case to this Court on diversity jurisdiction grounds. [Doc. 1.] On December 21, 2017, SRCC filed a motion to dismiss and to compel arbitration. [Doc. 7.] Plaintiff filed a response in opposition on January 4,2018 [Doc. 8], to which SRCC filed a reply on January 11, 2018 [Doc. 9]. The motion is now ripe for review.
This matter stems from an alleged breach of contract between Plaintiff and SRCC. [See Doc. 1-1.] In the Complaint, Plaintiff alleges that he is an inventor who developed a unique solar collector unit designed for home use and capable of efficiently heating water using solar energy. [Id. at 4 ¶ 5.] Plaintiff contends that he expended considerable sums of money in developing his product and secured patents for his invention. [Id. at 4 ¶ 6.] Plaintiff incorporated a business, known as K-Cor, Inc., to own Plaintiff's intellectual property and the products associated therewith.2 [Id. at 4 ¶ 7.] Plaintiff invented the "Rocket Dome" solar collector, which incorporated an innovative design featuring a curved collection surface and a dome covering the top of the collector. [Id. at 4 ¶ 8.] To facilitate the testing, production, and marketing of the Rocket Dome, Plaintiff sought to standardize production and to ensure compliance with all requirements for necessary testing prior to market entry. [Id. at 4 ¶ 9.] Plaintiff alleges that he developed a network of distributors who were prepared to market and sell the Rocket Dome once testing had been completed and production was underway. [Id. at 4 ¶ 10.]
In 2014, Plaintiff entered into a contract with SRCC to perform the required testing of the Rocket Dome, including testing for durability, functionality, and efficiency. [Id. at 5 ¶¶ 11-12.] Plaintiff contends that SRCC contracted with third-parties to conduct thetesting, including the North Carolina State University ("NCSU"), through its North Carolina Clean Energy Technology Center, a lab certified to conduct testing pursuant to SRCC guidelines. [Id. at 5 ¶ 13.] Pursuant to Plaintiff's contract with SRCC, the Rocket Dome underwent testing to determine its instantaneous thermal efficiency ("efficiency rating"). [Id. at 5 ¶ 14.] SRCC was supposed to use standard testing methods and definitions. [Id. at 5 ¶ 15.]
Plaintiff alleges, however, that SRCC performed multiple calculations that resulted in an efficiency rating that was inaccurate and not in conformity with appropriate standards. [Id. at 6 ¶ 18.] Due to its design, the Rocket Dome did not fit within SRCC's testing protocol, and the standards used by SRCC did not take the Rocket Dome's unique design into consideration. [Id. at 6-7 ¶ 22.] SRCC refused to alter its testing methodology accordingly, causing the actual functionality and thermal efficiency of the Rocket Dome to be inaccurate and misleading. [Id. at 6-7 ¶¶ 22-23.] According to Plaintiff, despite being informed of the inaccuracy, SRCC deliberately chose to report only the inaccurate efficiency rating based on the incorrect methodology it applied. [Id. at 7 ¶ 24.] SRCC reported the inaccurate results of its testing on its publicly available website and in other places. [Id. at 7 ¶ 25.] As a result of SRCC's published inaccurate information about the Rocket Dome, Plaintiff was unable to sell his product and the distributors were no longer interested in marketing the Rocket Dome to potential customers. [Id. at 8 ¶ 29.]
In response, Plaintiff commenced this action and, in his Complaint, asserts causes of action for breach of contract [id. at 8-9 ¶¶ 29-35] and for product disparagement [id. at9-10 ¶¶ 36-46]. SRCC now seeks to compel arbitration of the claims alleged in the Complaint. [See Doc. 7.]
The Federal Arbitration Act ("FAA") establishes a "strong federal public policy in favor of enforcing arbitration agreements" and is designed to "ensure judicial enforcement of privately made agreements to arbitrate." Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 217, 219 (1985). The FAA was enacted "in 1925 in order 'to reverse the longstanding judicial hostility to arbitration agreements that had existed at English common law and had been adopted by American courts, and to place arbitration agreements on the same footing as other contracts.'" Snowden v. CheckPoint Check Cashing, 290 F.3d 631, 639 (4th Cir. 2002) (quoting Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24 (1991)). "Underlying this policy is Congress's view that arbitration constitutes a more efficient dispute resolution process than litigation." Adkins v. Labor Ready, Inc., 303 F.3d 496, 500 (4th Cir. 2002) (citation omitted).
The FAA provides that arbitration clauses in contracts involving interstate commerce "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. Under the FAA, a district court must compel arbitration and stay court proceedings if the parties have agreed to arbitrate their dispute. Id. §§ 2, 3. But, if the validity of the arbitration agreement is in issue, a district court must first decide if the arbitration clause is enforceable against the parties. Id. § 4. "'[A]s a matter of federal law, any doubts concerning the scope of arbitrable issuesshould be resolved in favor of arbitration.'" Drews Distrib., Inc. v. Silicon Gaming, Inc., 245 F.3d 347, 349 (4th Cir. 2001) (quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983)). "A court should not deny a request to arbitrate an issue 'unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute.'" Id. at 349-50 (quoting United Steelworkers of Am. v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582-83 (1960)). Nevertheless, "a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit." Warrior & Gulf Navigation Co., 363 U.S. at 582.
A party seeking to compel arbitration must do so by establishing the following four elements: (1) the existence of a dispute between the parties; (2) a written agreement that includes an arbitration provision purporting to cover the dispute; (3) the relationship of the transaction, as evidenced by the agreement, to interstate or foreign commerce; and (4) the failure, neglect, or refusal of a party to arbitrate the dispute. Am. Gen. Life & Accident Ins. Co. v. Wood, 429 F.3d 83, 87 (4th Cir. 2005); see also Whiteside v. Teltech Corp., 940 F.2d 99, 102 (4th Cir.1991); Energy Absorption Sys. v. Carsonite Int'l, 377 F. Supp. 2d 501, 504 (D.S.C. 2005). "[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 (internal quotations and citation omitted). "Whether a party agreed to arbitrate a particular dispute is a question of state law governing contract formation." Id. (citing First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 944 (1995)). "[T]he party resisting arbitration bears the burden of proving that the claims at issue are unsuitable for arbitration." Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79, 81 (2000). Thus, where a valid arbitration agreementexists and covers the claims at issue, this Court has "no choice but to grant a motion to compel arbitration." Adkins, 303 F.3d at 500 (4th Cir. 2002).
The FAA requires a court to stay "any suit or proceeding" pending arbitration of "any issue referable to arbitration under an agreement in writing for such arbitration, and "[t]his stay-of-litigation provision is mandatory." Adkins, 303 F.3d at 500; see also 9 U.S.C. § 3. But, the Fourth Circuit has also held that if all of the claims asserted in a complaint are subject to arbitration, dismissal of the complaint is "an appropriate remedy." Choice Hotels Int'l, Inc. v. BSR Tropicana Resort, Inc., 252 F.3d 707, 709-10 (4th Cir. 2001). Although the Fourth Circuit has acknowledged the inconsistency between its opinions on this issue, see Aggarao v. MOL Ship Mgmt. Co., 675 F.3d 355, 376 n.18 (4th Cir. 2012) (), presently in this Circuit, a district court must stay an action pending arbitration of any arbitrable claims, with the exception that it may instead dismiss an action if all claims asserted are arbitrable. See Weckesser v. Knight Enterprises S.E., LLC, 228 F. Supp. 3d 561, 564 (D.S.C. 2017).
SRCC seeks to compel arbitration of the claims alleged in Plaintiff's Complaint. [Doc. 7 at 1.] SRCC also asks the Court to dismiss Plaintiff's Complaint. [Id.] The Court will address each issue below.
SRCC argues that the claims raised in the Complaint are subject to an arbitration agreement. [Doc. 7-1 at 1, 3.] Plaintiff,...
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