E. Hedinger AG v. Brainwave Sci., LLC

363 F. Supp. 3d 499
CourtDistrict Court, D. Delaware
DecidedFebruary 13, 2019
DocketC.A. No. 18-538 (MN)
StatusPublished
Cited by4 cases

This text of 363 F. Supp. 3d 499 (E. Hedinger AG v. Brainwave Sci., LLC) is published on Counsel Stack Legal Research, covering District Court, D. Delaware primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
E. Hedinger AG v. Brainwave Sci., LLC, 363 F. Supp. 3d 499 (D. Del. 2019).

Opinion

Maryellen Noreika, United States District Judge

Before the Court is the "Motion to Dismiss Pursuant to Federal Rule of Civil Procedure 12(b)(6)" (D.I. 11) filed by Defendants Brainwave Science, LLC, Brainwave Science, Inc., and Krishna Ika (collectively "Defendants" or "Brainwave"). Defendants allege that the Complaint (D.I. 1) filed by Plaintiffs E. Hedinger AG and Hedinger Middle East DWC LLC (collectively "Plaintiffs" or "Hedinger") fails to state a claim upon which relief may be granted "because the parties' partnership agreement requires that any dispute arising from or relating to that agreement be arbitrated" and because of asserted substantive deficiencies in each count (D.I. 12 at 1, 5-9). Although the motion itself seeks dismissal based on the arbitration clause, in its papers, Defendants assert that "this Court should compel arbitration pursuant to 9 U.S.C. § 202 and dismiss the Complaint." (D.I. 12 at 6). Thus, this Court treats Defendants' motion as a motion to compel arbitration as well as to dismiss. For the reasons set forth below, the Court will grant Defendants' motion to dismiss based on the arbitration clause1 and compel *503arbitration of the disputes between the parties.

I. BACKGROUND

A. Facts

In February of 2016, Plaintiffs "entered into a written contract (the 'Partnership Agreement') with [Defendant Brainwave Science, LLC] to be the exclusive dealer of a brain fingerprinting technology of which [Brainwave Science, LLC] held itself out to be the lawful owner ('BWS Technology')." (D.I. 1 ¶ 12). The Partnership Agreement included the following provisions that are relevant to the motion (D.I. 1, Ex. A):

3) Term and Termination
The agreement shall come into force on date of execution . The initial term of this Agreement shall be for a period of three years, commencing on the date of execution and renews automatically until and unless terminated by either parties through written termination notice of 90 days. Upon the date of the termination of the agreement, all legal obligations, rights and duties arising out of this agreement shall terminate.
* * *
19) Applicable Law, Jurisdictional Matters
D. The Parties shall exercise their best efforts to resolve by negotiation any and all disputes, controversies or differences between them arising out of or relating to this Agreement. All disputes, controversies or differences between the parties that are not settled by negotiation shall be submitted to International Arbitrary Commission in New York City, U.S.A. The arbitration shall be conducted in English in accordance with International Arbitration rules rules (sic) in effect at the time of applying for arbitration and shall be presided by a panel of three arbitrators, which each party choosing one and the International Court providing the third. The arbitral award is final and binding upon to (sic) both parties.

The Partnership Agreement was executed by Hedinger on February 29, 2016 and by Brainwave on March 1, 2016. (Id. ). Just over a year later, on March 16, 2017, Brainwave sent a "[n]otice of termination of current agreement between Brainwave Science (BWS) and E. Hedinger AG" stating that Plaintiffs "shall no longer be a partner/reseller/distributor for [BWS] Brain Fingerprinting or any other products." (D.I. 1, Ex. D). In the termination notice, Brainwave stated: "[a]s per section 3 'Term and Termination' of the Partnership agreement, please accept this letter as the official 90-day notification specified in our contract" and noted its decision to terminate was based on "a change in business strategy." (Id. ).

B. Procedural History

Prior to initiating this case, on March 28, 2017, Plaintiffs filed a Verified Complaint and Jury Demand in Massachusetts Superior Court.2 The Defendants moved to dismiss, arguing that "the Partnership Agreement clearly provides that any dispute 'arising out of or relating to' the agreement must be arbitrated, and any non-arbitrable disputes must be brought before a Delaware court." (D.I. 12 at 4). During the August 29, 2017 argument on that motion, the following discussion transpired:

*504The Court : All right. And then the parties are arguing over whether the arbitration clause is enforceable because it mentions a nonexistent entity perhaps.
Mr. Salinger : Well, not so much the arbitration clause, because I think the defendant would certainly be willing to jettison that.
The Court : Okay.
Mr. Salinger : It doesn't appear - it almost appears as though that was thrown in by whoever the drafter of this document was.

(D.I. 16, Ex 1, 2:20-3:4).

Thereafter, on September 28, 2017, the Massachusetts court dismissed the complaint with prejudice, finding that a review of the Partnership Agreement and its addendums made clear "that the parties intended to arbitrate their disputes, and also acts[ ] to deprive this court of jurisdiction, as any non-arbitrable disputes (which plaintiff asserts this matter is) must be litigated in Delaware." (D.I. 14 at 3-4). On January 30, 2018, an entry was made on the Massachusetts docket of an endorsement stating Defendants, "at oral argument, waived the arbitration clause defense." (D.I. 16, Ex. 2 at 1). Then on February 27, 2018, in response to Plaintiffs' motion to clarify judgment, the Massachusetts court entered an Amended Judgment clarifying:

"Paragraph a) of Section 13 [of Addendum II] requires that the agreement is to be governed by and construed under the laws of Delaware, and that the Delaware Courts shall have 'exclusive jurisdiction to adjudicate any non-arbitrable dispute arising out of this agreement.' This paragraph confirms that the parties intended to arbitrate their disputes , and also acts to deprive this court of jurisdiction, as any non-arbitrable disputes (which plaintiff asserts this matter is) must be litigated in Delaware.

(D.I. 15) (emphasis added).

On April 11, 2018, Plaintiffs filed the Complaint in this action (D.I. 1), asserting eleven counts, including fraudulent inducement, false advertising, violation of Delaware Uniform Deceptive Trade Practices Act, violation of Delaware Consumer Fraud Act, breach of contract, breach of implied covenant of good faith and fair dealing, intentional interference with advantageous business relations, indemnification, fraud, fraudulent transfer, and "successor liability." (D.I. 1). On May 25, 2018, Defendants moved to dismiss the Complaint, arguing that the parties are contractually required to arbitrate this dispute, or, alternatively, that each count fails to state a claim upon which relief may be granted. (D.I. 11).

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Bluebook (online)
363 F. Supp. 3d 499, Counsel Stack Legal Research, https://law.counselstack.com/opinion/e-hedinger-ag-v-brainwave-sci-llc-ded-2019.