Wake County Bd. of Educ. v. Dow Roofing Sys. Llc

• Decision Date: 10 June 2011
• Docket Number: No. 5:11–CV–10–BO.,5:11–CV–10–BO.
• Citation: 273 Ed. Law Rep. 268,792 F.Supp.2d 897
• Court: U.S. District Court — Eastern District of North Carolina
• Parties: WAKE COUNTY BOARD OF EDUCATION, Plaintiff,v.DOW ROOFING SYSTEMS, LLC, and JPS Elastomerics Corporation, Defendants.

792 F.Supp.2d 897

273 Ed. Law Rep. 268

WAKE COUNTY BOARD OF EDUCATION, Plaintiff,

v.DOW ROOFING SYSTEMS, LLC, and JPS Elastomerics Corporation, Defendants.

No. 5:11–CV–10–BO.

United States District Court, E.D. North Carolina,Western Division.

June 10, 2011.

OPINION TEXT STARTS HEREWest CodenotesRecognized as PreemptedWest's N.C.G.S.A. § 22B–2

Daniel W. Clark, Tharrington Smith, LLP, Raleigh, NC, for Plaintiff.Bradley M. Risinger, Smith Moore LLP, Raleigh, NC, for Defendants.

ORDER

TERRENCE WILLIAM BOYLE, District Judge.

Before the Court is a Motion to Dismiss, or, Alternatively, a Motion to Stay Pending Arbitration [DE 5] filed by Defendant Dow Roofing Systems, LLC, f/k/a/ Stevens Roofing Systems (“Dow Roofing”), as the successor-in-interest to Co–Defendant JPS Elastomerics Corporation (“JPS”). For the following reasons, the Motion is GRANTED and the Complaint is DISMISSED WITHOUT PREJUDICE.

I. BACKGROUND

Plaintiff Wake County Board of Education (“Board”) commenced this action alleging breach of contract, breach of warranties, breach of the covenant of good faith and fair dealing, and defective products against Defendant Dow Roofing. The Board's claims arise from problems with roofing system components that were designed and manufactured by Dow Roofing and installed on buildings owned by the Board. The Board alleges that the roofing systems have been plagued by problems and that Dow Roofing has failed to fix the problems despite its legal obligations to do so.

The Board sued Dow Roofing in North Carolina state court on December 10, 2010. Dow Roofing removed the state court action to this Court on January 7, 2011 based on the parties' diversity of citizenship. On February 14, 2011, Dow Roofing moved to dismiss the Complaint or, alternatively, to stay the proceedings [DE 5]. Dow Roofing contends this suit is subject to a dismissal or a stay because the Board's claims are governed by valid arbitration agreements. Dow Roofing contends that the Board has flouted its responsibilities under those agreements by filing this action.

The components for each of the roofing systems were covered by a limited warranty agreement. Each of those limited warranty agreements contained the following dispute resolution provision:

Any controversy or claim arising out of or relating to this document, or the breach thereof, shall be settled by arbitration in accordance with the Construction Industry Rules of the American Arbitration Association at the Boston, Mass., Regional Office and judgment upon the award rendered by the Arbitrators may be entered in any court having jurisdiction thereof.

(Declaration of Steve Moskowitz (“Moskowitz Decl.”) at Exs. A–O, ¶ 12) [DE 6–1].

Dow Roofing contends that under the limited warranty agreements' dispute resolution provisions, the Federal Arbitration Act mandates either a dismissal of this action or a stay of the proceedings pending arbitration in Boston, Massachusetts. The Court agrees.

II. DISCUSSION

Dow Roofing has moved to dismiss Plaintiffs' Complaint on jurisdictional grounds under Rule 12 of the Federal Rules of Civil Procedure. Under Rule 12(b)(1), the plaintiff bears the burden of showing that federal jurisdiction is appropriate when challenged by the defendant. McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 189, 56 S.Ct. 780, 80 L.Ed. 1135 (1936); Adams v. Bain, 697 F.2d 1213, 1219 (4th Cir.1982). When the 12(b)(1) motion attacks the complaint as failing to state facts upon which subject matter jurisdiction may be based, the facts in the complaint are assumed to be true and the plaintiff is afforded the same protections he or she would receive under a 12(b)(6) motion. Adams, 697 F.2d at 1219. The 12(b)(1) motion may, alternatively, attack the existence of subject matter jurisdiction in fact, apart from the complaint. Id. This type of attack is used when a court's limited jurisdiction precludes hearing the case brought. Materson v. Stokes, 166 F.R.D. 368, 371 (E.D.Va.1996). Because the court's power to hear the case is at issue in a 12(b)(1) motion, the court is free to weigh the evidence to determine the existence of jurisdiction. Adams, 697 F.2d at 1219. No presumptive truthfulness attaches to either party's claims.

Whether the parties have agreed to arbitrate their disputes is a jurisdictional question. See Brotherhood of Ry. & S.S. Clerks v. Norfolk S. Ry. Co., 143 F.2d 1015, 1017 (4th Cir.1944) (“Arbitration deprives the judiciary of jurisdiction over the particular controversy and the courts have long ruled that there must be strict adherence to the essential terms of the agreement to arbitrate.”). Thus, the Court may consider materials outside the pleadings, including the warranty contracts at issue in this case, to determine whether a valid arbitration agreement exists. See id. Because of the strong federal policy favoring arbitration, the burden lies with the party opposing arbitration to demonstrate why arbitration should not be ordered. See Shearson/American Express, Inc. v. McMahon, 482 U.S. 220, 227, 107 S.Ct. 2332, 96 L.Ed.2d 185 (1987).

A. The Arbitration Agreements Are Enforceable

The FAA provides in relevant part:

A written provision in ... a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof ... 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. In this case, the arbitration agreements must be enforced unless there are sufficient legal or equitable grounds to revoke the agreements. Here, the Board argues that both equitable and legal grounds exist which relieve the Board of its duties under the arbitration agreements. The Court finds the Board's arguments unpersuasive.

1. No Equitable Grounds For Revocation Exist

The Board claims it possesses an equitable shield against enforcement of these arbitration agreements. Among other things, the Board highlights (1) its initial choice in filing the case in this forum, (2) the relative ease of access to sources of proof, (3) the possibility to view the premises, and (4) the local interest in having this controversy settled in North Carolina. The Board argues that a court sitting in equity should apply these factors to revoke the arbitration agreements.

The cited factors admittedly establish an inconvenience to the Plaintiff. The Board's slight evidence of inconvenience, however, cannot “overcome the ‘counterweight’ of the parties' private expression of their venue [and, presumably, their dispute resolution] preferences.” Creditors Collection Bureau, Inc. v. Access Data, Inc., 820 F.Supp. 311, 313 (W.D.Ky.1993).

The Court notes that the access to the proof in this action is no less impaired by arbitration in Massachusetts than it would be by proceeding judicially in North Carolina. Although physically viewing these roofing systems could potentially be more difficult in Massachusetts than in North Carolina, it would hardly be impossible: other methods of documenting the alleged problems with the roofing systems are widely available. Photographs and video-recordings would certainly suffice to meet the Board's evidentiary needs.

Moreover, contrary to Board's vague assertions, the Court is skeptical that any “local interest” is served by proceeding in this forum. This is a basic breach of warranty action pertaining to Defendants goods. No compelling State interest is implicated on these facts. And even assuming, arguendo, that a compelling interest did exist, the Court finds that gratifying that interest would certainly not be paramount to enforcing the freely negotiated agreement of these parties.

The Court finds that any alleged inconvenience does not deprive the Board of its day in court, which is what a Plaintiff must show to defeat an arbitration agreement in equity. See Mercury Coal & Coke, Inc. v. Mannesmann Pipe and Steel Corp., 696 F.2d 315, 318 (4th Cir.1982) (finding that “inconvenience serves as a ground for invalidation only when enforcement would ‘deprive a party of his day in court’). On these facts, equity cannot void an otherwise valid contractual agreement of the parties.”

2. No Legal Grounds For Revocation Exist

The Court now assesses whether any legal grounds exist which void the instant arbitration agreements. State statutory law can serve as a basis for revoking an arbitration contract so long as the statute does not single out arbitration agreements for special treatment. Doctor's Assocs., Inc. v. Casarotto, 517 U.S. 681, 686–88, 116 S.Ct. 1652, 134 L.Ed.2d 902 (1996). Here, in support of its push for invalidation of the arbitration agreements, the Board relies on N.C. Gen.Stat. § 22B–2. That statute provides in relevant part:

A provision in any contract, subcontract, or purchase order for the improvement of real property in this State, or the providing of materials therefor, is void and against public policy if it makes the contract, subcontract, or purchase order subject to the laws of another state, or provides that the exclusive forum for any litigation, arbitration, or other dispute resolution process is located in another state.

N.C. Gen.Stat. § 22B–2.

At the outset, the Court notes that it is unclear whether the cited statute has any application in this case at all. The statute applies to contracts “for the improvement of real property” and for contracts for “the providing of materials.” But in this case, Dow provided the limited warranties to the Board after the roofing systems and their components had been sold to the Board and installed on the buildings. This is not a case, therefore, about the “improvement” of real property. And it also appears that the case is not really about “the providing of materials” since the roofing systems' components had already been supplied to the Board before Dow issued the warranties. Instead, the focus of the case...