Francisco J. Ortiz & Co. v. Masco Corp.

147 F. Supp. 3d 1, 2015 U.S. Dist. LEXIS 163231, 2015 WL 7828443
CourtDistrict Court, D. Puerto Rico
DecidedDecember 3, 2015
DocketCivil No. 15-1500 (FAB)
StatusPublished

This text of 147 F. Supp. 3d 1 (Francisco J. Ortiz & Co. v. Masco Corp.) is published on Counsel Stack Legal Research, covering District Court, D. Puerto Rico primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Francisco J. Ortiz & Co. v. Masco Corp., 147 F. Supp. 3d 1, 2015 U.S. Dist. LEXIS 163231, 2015 WL 7828443 (prd 2015).

Opinion

MEMORANDUM AND ORDER

BESOSA, District Judge.

Before the Court is defendant Masco Corporation of Indiana (“MCI”)’s motion to compel arbitration and dismiss the case without prejudice. (Docket No. 5.) For the reasons that follow, the motion is GRANTED and this case is DISMISSED WITHOUT PREJUDICE.

I. BACKGROUND

Plaintiff Francisco J. Ortiz & Co., Inc. (“FJO”) is a Puerto Rico corporation, and defendant MCI is an Indiana corporation. (Docket No. 1-2 at pp. 1-2.) In 1964, FJO and MCI established a commercial relationship pursuant to which FJO became a sales representative for MCI products. Id. at p. 2. The contractual relationship continued unaltered until 2009, when FJO and MCI signed a new representation agreement (the “2009 agreement”). Id. at p. 3.

The 2009 agreement contains two provisions that were not included in any previous written agreement between the parties. First, it contains a clause expressly granting MCI the right to appoint additional sales representatives for its products in Puerto Rico. (Docket No. 1-2 at pp. 4, 38.) Second, it contains the following arbitration clause:

Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be determined by arbitration administered by the International Center for Dispute Resolution of the American Arbitration Association in accordance with its International Arbitration Rules. The number of arbitrators shall be three (3). The place of arbitration shall be in the city of Indianapolis, Indiana, USA. The language of the arbitration shall be in English. The arbitrators shall issue a reasoned award, and it shall be final and binding upon the parties and not subject to further appeal. The arbitrators shall be empowered to award money damages but may not award consequential, incidental, exemplary or punitive damages or order specific performance.

Id. at pp. 44-45.

On September 3, 2014, defendant MCI sent a letter to plaintiff FJO terminating the 2009 agreement effective December 2, 2014. See Docket No. 1-2 at pp. 6, 51.

On March 3, 2015, FJO filed suit against MCI in Puerto Rico Superior Court seeking damages pursuant to Puerto Rico’s Sales Representative Act, commonly known as Law 21, P.R. Laws Ann. tit. 10, §§ 279-279h. (Docket No. 1-2 at pp. 1-10.) MCI removed the case tó federal court on diversity grounds. (Docket No. 1.)

MCI then moved to compel arbitration, citing the arbitration clause in the 2009 agreement. (Docket No. 5.) FJO opposed, arguing that the 2009 agreement should be declared “null and void” because FJO signed the agreement “under duress [3]*3and intimidation.” (Docket No. 14 at p. 5.) MCI replied, and FJO filed a surreply. (Docket Nos. 17,20.)

While MCI’s motion to compel arbitration was pending, the Court issued a case management order setting deadlines and proceedings leading up to trial on November 14, 2016. (Docket No.'21.) MCI requested a stay of these deadlines and proceedings until the Court ruled on MCI’s motion to compel arbitration. (Docket No. 22.) The Court denied the request to stay. (Docket No. 23.) MCI filed a notice of appeal, stating that the Court’s refusal to stay “effectively denied” MCI’s motion to compel arbitration. (Docket No. 29.) MCI then moved the Court to stay the proceedings pending appeal. (Docket No. 30.) FJO opposed the motion to stay, and MCI replied. (Docket Nos. 35, 38.)

II. DISCUSSION

The Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 1-16, expresses a congressional policy favoring arbitration. Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 443, 126 S.Ct. 1204, 163 L.Ed.2d 1038 (2006). The FAA mandates that district courts compel arbitration when the parties have signed a valid arbitration agreement governing the issues in dispute. 9 U.S.C. § 4; Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218, 105 S.Ct. 1238, 84 L.Ed.2d 158 (1985). Section 2 of the FAA provides that a written arbitration agreement is “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. “[Generally applicable contract defenses, such as fraud, duress, or unconscionability, may be applied to invalidate arbitration agreements....” Doctor’s Assocs., Inc. v. Casarotto, 517 U.S. 681, 687, 116 S.Ct. 1652, 134 L.Ed.2d 902 (1996).

In a line of cases beginning with Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967), the United States Supreme Court has divided challenges to the validity of arbitration agreements into two types: (1) challenges to the validity of the specific agreement to arbitrate, and (2) challenges to the validity of the whole contract containing the agreement to arbitrate. See Rent-A-Ctr., W., Inc. v. Jackson, 561 U.S. 63, 70, 130 S.Ct. 2772, 177 L.Ed.2d 403 (2010); Buckeye, 546 U.S. at 444, 126 S.Ct. 1204; Prima Paint, 388 U.S. at 402-04, 87 S.Ct. 1801. The type of challenge governs who resolves it. Challenges of the first type are for courts to consider before compelling arbitration, whereas challenges of the second type are for arbitrators to decide in the first instance. Rent-A-Ctr., 561 U.S. at 70-71, 130 S.Ct. 2772; Buckeye, 546 U.S. at 444-46, 126 S.Ct. 1204; Prima Paint, 388 U.S. at 402-04, 87 S.Ct. 1801.

This rule is rooted in FAA Section 2’s severability doctrine, which requires “that courts treat an arbitration clause as severable from the contract in which it appears and enforce it according to its terms unless the party resisting arbitration specifically challenges the enforceability of the arbitration clause itself, ... or claims that the agreement to arbitrate was [n]ever concluded.” Granite Rock Co. v. Int’l Bhd. of Teamsters, 561 U.S. 287, 301, 130 S.Ct. 2847, 177 L.Ed.2d 567 (2010) (alteration in original) (citations and quotation marks omitted); see 9 U.S.C. § 2. In a validity challenge based on fraud, for example, “even where ... the alleged fraud that induced the whole contract equally-induced the agreement to arbitrate which was part of that contract^] ... the basis of challenge [must] be directed specifically to the agreement to arbitrate before the court will intervene.” Rent-A-[4]*4Ctr., 561 U.S. at 71, 130 S.Ct. 2772; accord Farnsworth v. Towboat Nantucket Sound, Inc., 790 F.3d 90

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Related

Prima Paint Corp. v. Flood & Conklin Mfg. Co.
388 U.S. 395 (Supreme Court, 1967)
Dean Witter Reynolds Inc. v. Byrd
470 U.S. 213 (Supreme Court, 1985)
Doctor's Associates, Inc. v. Casarotto
517 U.S. 681 (Supreme Court, 1996)
Buckeye Check Cashing, Inc. v. Cardegna
546 U.S. 440 (Supreme Court, 2006)
Dialysis Access Center, LLC v. RMS Lifeline, Inc.
638 F.3d 367 (First Circuit, 2011)
Jason Bercovitch v. Baldwin School, Inc.
133 F.3d 141 (First Circuit, 1998)
Farnsworth, III v. Towboat Nantucket Sound, Inc.
790 F.3d 90 (First Circuit, 2015)

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Bluebook (online)
147 F. Supp. 3d 1, 2015 U.S. Dist. LEXIS 163231, 2015 WL 7828443, Counsel Stack Legal Research, https://law.counselstack.com/opinion/francisco-j-ortiz-co-v-masco-corp-prd-2015.