Young v. Element Brand Holdings, LLC
| Decision Date | 25 March 2021 |
| Docket Number | Case No.: 0:20-cv-1953-SAL |
| Parties | Tanya Young, Plaintiff, v. Element Brand Holdings, LLC d/b/a Element Electronics, Michael O'Shaughnessy, Individually, and Carl Kennedy, Individually Defendants. |
| Court | U.S. District Court — District of South Carolina |
This matter is before the Court for review of the February 2, 2021 Report and Recommendation of United States Magistrate Judge Thomas E. Rogers, III (the "Report"), made in accordance with 28 U.S.C. § 636(b) and Local Civil Rule 73.02 (D.S.C.). In the Report, the Magistrate Judge recommended that Defendants' motion to dismiss and compel arbitration, ECF No. 5, be granted and Plaintiff's claims be compelled to arbitration. [ECF No. 17]. Plaintiff filed timely objections to the Report, ECF No. 20, and Defendants replied, ECF No. 21. For the following reasons, the Court adopts the Report and Recommendation, ECF No. 17, as modified by this Order.
On February 2, 2021, the Magistrate Judge issued a thorough Report and Recommendation. The Report sets forth in detail the relevant facts and standards of law on this matter. See [ECF No. 17]. This Court incorporates those facts and standards without a recitation, except to clarify one point of apparent confusion. Defendants moved to dismiss this action and compel arbitration pursuant to Rules 12(b)(1) and (6) of the Federal Rules of Civil Procedure and section three of the Federal Arbitration Act. [ECF No. 5 p.1]; Fed. R. Civ. P. 12(b)(1), (6); 9 U.S.C. § 3. The Magistrate Judge found the motion to dismiss and compel arbitration was most properly considered a motion to dismiss for improper venue under Rule 12(b)(3). [ECF No. 17 p.4]. The Magistrate reasoned, citing pre-2013 Fourth Circuit authority, that (b)(3) was the proper subsection of Rule 12 because an arbitration clause is "a specialized kind of forum-selection clause." Id. While the Magistrate's choice to consider the motion under Rule 12(b)(3) had no substantive effect on the Report, it was technically erroneous.
"Prior to 2013, Rule 12(b)(3) was considered the proper vehicle by which a party may move to dismiss an action for improper venue based on a forum-selection clause." Hyundai Merch. Marine Co. v. ConGlobal Indus., LLC, No. 2:15-CV-01562-DCN, 2015 WL 13841411, at *3 (D.S.C. Nov. 4, 2015) (citing Atlantic Floor Servs., Inc. v. Wal-Mart Stores, Inc., 334 F. Supp. 2d 875, 877 (D.S.C. 2004)). However, in Atlantic Marine Construction Co. v. U.S. District Court for the Western District of Texas, the law changed when the Supreme Court of the United States addressed the procedure that is available for a defendant in a civil case who seeks to enforce a forum-selection clause. 571 U.S. 49 (2013). In Atlantic Marine, the Court held that Rule 12(b)(3) allows dismissal only when venue is wrong or improper, a determination that "depends exclusively on whether the court in which the case was brought satisfies the requirements of federal venue laws." Id. at 577. The Court held that a forum-selection clause does not itself make venue improper. Id. Accordingly, dismissal under Rule 12(b)(3) is not available in this case.
Instead, the motion is best analyzed under sections three and four of the Federal Arbitration Act. 9 U.S.C. § 3-4. Section three requires a court to stay the trial of an action on issues that are subject to arbitration. 9 U.S.C. § 3. However, when every claim in a case must be submitted to arbitration, the court may dismiss the case instead of staying it. Alford v. Dean Witter Reynolds,Inc., 975 F.2d 1161, 1164 (5th Cir. 1992); Sea-Land Service, Inc. v. Sea-Land of P.R., Inc., 636 F. Supp. 750, 757 (D. Puerto Rico 1986); Sparling v. Hoffman Const. Co., Inc., 864 F.2d 635, 638 (9th Cir. 1988); Hoffman v. Fidelity and Deposit Co. of Maryland, 734 F.Supp. 192, 195 (D.N.J. 1990); Dancu v. Coopers & Lybrand, 778 F. Supp. 832, 835 (E.D. Pa.1991). Section four allows a district court of competent jurisdiction to compel arbitration where appropriate. 9 U.S.C. § 4. Section three empowers the court to stay or dismiss the action while section four empowers the court to compel arbitration. Therefore, Defendants' motion to dismiss and compel arbitration is best analyzed under sections three and four of the Federal Arbitration Act. Despite the Magistrate's consideration of the motion under 12(b)(3), the legal standard is the same: if every claim in this action must be submitted to arbitration, the court will dismiss the case without prejudice and compel arbitration.
The Court is charged with making a de novo determination of those portions of the Report to which specific objections are made, and the Court may accept, reject, or modify, in whole or in part, the recommendation of the Magistrate Judge, or recommit the matter to the Magistrate Judge with instructions. See 28 U.S.C. § 636(b)(1). A district court, however, is only required to conduct a de novo review of the specific portions of the Magistrate Judge's Report to which an objection is made. See id.; Fed. R. Civ. P. 72(b); Carniewski v. W. Virginia Bd. of Prob. & Parole, 974 F.2d 1330 (4th Cir. 1992). In the absence of specific objections to portions of the Report, this Court is not required to give an explanation for adopting the recommendation. See Camby v. Davis, 718 F.2d 198, 199 (4th Cir. 1983). Thus, the Court must only review those portions of the Report to which the party has made a specific written objection. Diamond v. Colonial Life & Acc. Ins. Co., 416 F.3d 310, 316 (4th Cir. 2005).
"An objection is specific if it 'enables the district judge to focus attention on those issues—factual and legal—that are at the heart of the parties' dispute.'" Dunlap v. TM Trucking of the Carolinas, LLC, No. 0:15-cv-04009-JMC, 2017 WL 6345402, at *5 n.6 (D.S.C. Dec. 12, 2017) (citing One Parcel of Real Prop. Known as 2121 E. 30th St., 73 F.3d 1057, 1059 (10th Cir. 1996)). A specific objection to the Magistrate's Report thus requires more than a reassertion of arguments from the pleading or a mere citation to legal authorities. See Workman v. Perry, No. 6:17-cv-00765-RBH, 2017 WL 4791150, at *1 (D.S.C. Oct. 23, 2017). A specific objection must "direct the court to a specific error in the magistrate's proposed findings and recommendations." Orpiano v. Johnson, 687 F.2d 44, 47 (4th Cir. 1982).
"Generally stated, nonspecific objections have the same effect as would a failure to object." Staley v. Norton, No. 9:07-0288-PMD, 2007 WL 821181, at *1 (D.S.C. Mar. 2, 2007) (citing Howard v. Sec'y of Health and Human Servs., 932 F.2d 505, 509 (6th Cir. 1991)). The Court reviews portions "not objected to—including those portions to which only 'general and conclusory' objections have been made—for clear error." Id. (emphasis added) (citing Diamond, 416 F.3d at 315; Camby, 718 F.2d at 200; Orpiano, 687 F.2d at 47).
Plaintiff's specific objections are as follows:
[ECF No. 20 pp.1-2]. The Court will make a de novo determination of these portions of the Report.
Plaintiff's first three objections are related and treated under a single heading in Plaintiff's filing. See [ECF No. 20 p.3]. Plaintiff objects to the Magistrate Judge's finding that the arbitration provision in the parties' original Employment Agreement survived the parties' subsequent Separation Agreement. Id. These objections require a de novo determination of how the subsequent Separation Agreement affected the arbitration provision in the parties' original Employment Agreement.
Plaintiff contends that the Separation Agreement constituted a novation of the original Employment agreement, which contained the arbitration clause. Id. at 9. Under South Carolina Law, a novation is a mutual agreement between all concerned parties for the discharge of a valid, existing obligation by the substitution of a new valid obligation. Laidlaw Env't Servs., (TOC), Inc. v. Honeywell, Inc., 966 F. Supp. 1401, 1410 (D.S.C. 1996), aff'd, 113 F.3d 1232 (4th Cir. 1997) (citing Superior Automobile Ins. Co. v. Maners, 261 S.C. 257, 199 S.E.2d 719, 722 (1973) (per curiam)). If the Separation Agreement discharged the arbitration provision in the Employment Agreement by novation, no valid and enforceable agreement to arbitrate exists between the parties.
To establish a novation, Plaintiff must prove, by a preponderance of the evidence, (1) the existence of a previous valid obligation, (2) agreement of all parties to the new contract, (3) extinguishment of the old obligation, and (4) the making of a valid new contract. Laidlaw, 966 F. Supp. at 1410 (citing Callaham v. Ridgeway, 138 S.C. 10, 135 S.E. 649 (1962). In proving these elements, the parties' intent to...
To continue reading
Request your trial