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Knight v. Idea Buyer, LLC

United States District Court, S.D. Ohio, Eastern Division

May 8, 2017

MYRON KNIGHT, et al., Plaintiffs,
v.
IDEA BUYER, LLC, et al., Defendants.

          Kemp Magistrate Judge

          OPINION AND ORDER

          GEORGE C. SMITH, JUDGE UNITED STATES DISTRICT COURT

         This matter is before the Court on Defendants Idea Buyer, LLC, Eric Corl, John Weller, Alexis Chambers, Michael Corradini, Jess McPherone, and Ari Marcellino's[1] Motion to Dismiss pursuant to Rule 12(B)(1) of the Federal Rules of Civil Procedure, or in the alternative, to stay litigation and compel arbitration. (Doc. 17). This Motion is fully briefed and ripe for review. For the reasons that follow, Defendants' Motion to Dismiss is GRANTED and the Motion to Stay is DENIED AS MOOT.[2]

         I. BACKGROUND

         Plaintiffs Myron Knight and Royce Dickerson, on behalf of themselves and all other similarly situated, initiated this class action lawsuit on December 15, 2016. (Doc. 1, Compl.). Plaintiffs bring this claim against Defendant Idea Buyer, LLC, and the individual Defendants who are current and former officers and/or employees of Idea Buyer, LLC, for violations of the American Inventor's Protection Act, 35 U.S.C. § 297 (“AIPA”), unjust enrichment, fraudulent inducement, and injunctive relief.

         Plaintiffs Knight and Dickerson are individuals, and customers as defined by 35 U.S.C. §297(c)(2), who entered into contracts with Idea Buyer, an invention promoter, for invention promotion services. Defendant Idea Buyer is an Ohio limited liability company, with its principal place of business in Dublin, Ohio. Idea Buyer offers invention promotion services as defined in 35 U.S.C. § 297(c)(4), as it works to find a firm, corporation, or other entity to develop and market products or services that include the invention of the customer. Plaintiffs claim that Defendants have engaged in a deceptive pattern and practice in their invention promotion services and failed to provide the mandatory pre-contract disclosures under the AIPA.

         On November 12, 2014, Plaintiff Knight entered into a “Fast Track Agreement” with Idea Buyer, and on May 23, 2015, Plaintiff Dickerson entered into the same agreement with Idea Buyer (hereinafter the “Agreements”). Plaintiffs asserts that at no time prior to, during, or after negotiations and entering into the Agreements for services with Idea Buyer, did Idea Buyer ever comply with 35 U.S.C. § 297(a)[3] of the AIPA.

         The Agreements between Plaintiffs and Idea Buyer contain an arbitration provision, which states:

Any and all disputes shall be submitted to binding arbitration. In the event that a dispute arises concerning this Agreement or performance under this Agreement, the dispute shall be submitted to binding arbitration through and pursuant to the rules of the American Arbitration Association.

(Doc. 17-1, Knight and Dickerson Fast Track Agreements). Defendants argue by virtue of the above provision, that this case must be submitted to arbitration.

         Plaintiffs, however, contend that “[b]ecause 35 U.S.C. § 297(a) of the AIPA applies to precontract negotiations, before any meetings of the minds occurs with respect to any contractual obligations, any arbitration provision that may be relied upon by Defendants is inapplicable to this action, and therefore, void.” (Doc. 1, Compl. ¶ 34).

         II. STANDARD OF REVIEW

         Defendants move to dismiss this case pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure for lack of subject matter jurisdiction based on their argument that Plaintiffs' claims are subject to an arbitration agreement. “When an agreement to arbitrate encompasses claims asserted in court, dismissal is appropriate under Fed. Rule Civ. P. 12(b)(1) for lack of subject matter jurisdiction. . . .” Deck v. Miami Jacobs Bus. College Co., No. 3:12-cv-63, 2013 U.S. Dist. LEXIS 14845, 26 (S.D. Ohio Jan. 31, 2013) (Black, J). In the alternative, Defendants seek to have this case stayed pending arbitration.

         Under the Federal Arbitration Act, 9 U.S.C. §§ 1-16 (“FAA”), a written agreement to arbitrate disputes arising out of a contract 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. The requirements set forth in the FAA were “designed to override judicial reluctance to enforce arbitration provisions, to relieve court congestion, and to provide parties with a speedier and less costly alternative to litigation.” Stout, 228 F.3d at 714.

         Section 4 of the FAA sets forth the procedure to be followed by the district court when presented with a petition to compel arbitration and provides, in relevant part, that:

[a] party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration may petition any United States district court ... for an order directing that such arbitration proceed in the manner provided for in such agreement.... The court shall hear the parties, and upon being satisfied that the making of the agreement for arbitration or the failure to comply therewith is not in issue, the court shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement.... If the making of the arbitration agreement ... be in issue, the court shall proceed summarily to the trial thereof.

9 U.S.C. § 4. Thus, the Court must first inquire as to whether the parties have agreed to arbitrate the dispute at issue. If the district court is satisfied that the agreement to arbitrate is not “in issue, ” it must compel arbitration. If the validity of the agreement to arbitrate is “in issue, ” the court must proceed to a trial to resolve the question. Id.

         In order to show that the validity of the agreement is “in issue, ” the party opposing arbitration must show a genuine issue of material fact as to the validity of the agreement to arbitrate. See Doctor's Assocs., Inc. v. Distajo, 107 F.3d 126, 129-30 (2d Cir. 1997). The required showing mirrors that required to withstand summary judgment in a civil suit. Id.; see also Aiken v. City of Memphis, 190 F.3d 753, 755 (6th Cir. 1999) (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)).

         The “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, 91 (2000). But “[i]n order to show that the validity of the agreement is ‘in issue' [under 9 U.S.C. § 4], the party opposing arbitration must show a genuine issue of material fact as to the validity of the agreement to arbitrate.” Great Earth Cos. v. Simons, 288 F.3d 878, 889 (6th Cir. 2002).

         The FAA establishes a liberal policy favoring arbitration agreements, and any doubts regarding arbitrability should be resolved in favor of arbitration over litigation. See Nestle Waters North America, Inc. v. Bollman, 505 F.3d 498, 503 (6th Cir. 2007) (“[W]e examine arbitration language in a contract in light of the strong federal policy in favor of arbitration, resolving any doubts as to the parties' intentions in favor of arbitration.”). However, “[w]hile ambiguities … should be resolved in favor of arbitration, we do not override the clear intent of the parties, or reach a result inconsistent with the plain text of the contract, simply because the policy favoring arbitration is implicated.” EEOC v. Waffle House, Inc., 534 U.S. 279, 294 (2002) (internal citation omitted).

         The Sixth Circuit applies “the cardinal rule that, in the absence of fraud or willful deceit, one who signs a contract which he has had an opportunity to read and understand, is bound by its provisions.” Allied Steel & Conveyors, Inc. v. Ford Motor Co., 277 F.2d 907, 913 (6th Cir. 1960). It is settled authority that doubt regarding the applicability of an arbitration clause should be resolved in favor of arbitration. Id. Indeed, “any doubts are to be resolved in favor of arbitration unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute.” See Nestle, 505 F.3d at 504. If parties contract to resolve their disputes in arbitration rather than in the courts, a party may not renege on that contract absent the most extreme circumstances. All ...


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