United States District Court, S.D. Ohio, Western Division, Dayton
AND ORDER STAYING ALL CAUSES OF ACTION AGAINST ALL
DEFENDANTS, DENYING DEFENDANTS 100 EAST THIRD ST, LLC, 115 E.
THIRD, LLC, AND WINDSOR CONSTRUCTION SERVICES LLC'S
MOTION TO DISMISS (Doc. No. 10); DENYING DEFENDANT NICHOLAS
KINNEY'S MOTION TO DISMISS (Doc. No. 12); AND REQUIRING
100 EAST THIRD ST, LLC AND 115 E. THIRD, LLC TO SUBMIT TO
THIS COURT UPDATES TO STATUS OF THE ARBITRATION EVERY 60
M. ROSE UNITED STATES DISTRICT JUDGE.
before the Court are motions of Defendants 100 East Third St,
LLC (“100 ETS”), 115 E. Third, LLC (“115
ETS”), Windsor Construction Services LLC
(“Windsor”), and Nicholas Kinney
(“Kinney”) to dismiss Plaintiff McGill Smith
Punshon, Inc.'s (“MSP”) claims pursuant to
Federal Rule of Civil Procedure 12(b)(6). Doc. Nos. 10, 12.
Plaintiff MSP filed their complaint on August 23, 2018. Doc.
No. 1. Defendants 100 ETS, 115 ETS, and Windsor jointly filed
a Motion to Dismiss on October 15, 2018. Doc. No. 10.
Defendant Kinney filed a Motion to Dismiss on November 18,
2018. Doc No. 12. MSP filed a response to the first motion on
November 5, 2018 and to the second motion on December 10,
2018. Doc. Nos. 11, 14. Defendants 100 ETS, 115 ETS, and
Windsor jointly filed a reply to MSP's response on
November 19, 2018. Doc. No. 13. No party has moved to stay
the proceedings or to compel arbitration. Defendant
Fireblocks has not filed anything in response to the
complaint, or joined the Motions to Dismiss. See
Doc. No. 1-2 PageID 15, 25; Doc. No. 11 at 2, n. 1.
reasons discussed below, the Court will treat Defendants
Motions to Dismiss as motions to dismiss or, in the
alternative, to stay the proceedings. The Court hereby orders
that because MSP sufficiently pleads a cause of action
against multiple defendants including Defendant Kinney,
Kinney's Motion to Dismiss is DENIED.
The Court hereby GRANTS in part and
DENIES in part 100 ETS and 115 ETS Motion to
Dismiss. The Court hereby DENIES Defendants
Windsor's Motion to Dismiss. The Court hereby
STAYS this case as to all parties pursuant
to section 3 of the Federal Arbitration Act
(“FAA”) and ORDERS Defendants
100 ETS and 115 ETS to submit updates on the status of the
arbitration every sixty (60) days.
MSP is a Cincinnati based architecture and engineering firm.
Doc. No. 1 ¶ 12. MSP alleges entering into an agreement
listed as the Architect with Defendant Fireblocks LLC
(“Fireblocks”) listed as Owner on February 7,
2017. Id. ¶ 13; Doc. No. 1-2 at 1. The
agreement is a Master Agreement (“Master
Agreement”) between Owner and Architect. Doc. No. 1
¶ 13; Doc. No. 1-2 PageID 15. The Master Agreement also
has a provision that applies the Master agreement to service
orders, thereby forming a Service Agreement. Doc. No. 1-2
PageID 15 (Article 1 § 1.2 of the Master Agreement). MSP
entered into two service orders with 115 ETS listed as the
Owner on February 7. 2017 and on September 20, 2017. Doc. No.
1-3 PageID 28; Doc. No. 1-4 PageID 38. MSP also entered into
two service orders with 100 ETS listed as the Owner on April
25, 2017 and on September 20, 2017. Doc. No. 1-5 PAGEID 55;
Doc. No. 1-6 PageID 66. Defendants Windsor and Kinney are not
listed parties to any service order or the Master Agreement.
Doc. No. 11 at 2.
alleges they conveyed architectural drawings and construction
and design documents to Fireblocks, 100 ETS, and 115 ETS, via
instruments of service (IOS works), pursuant to the above
agreements (Master Agreement and Service orders). Doc. No. 1
¶¶ 17-8. MSP also asserts they own the copyrights
to the IOS works, which they registered with the U.S.
Copyright office. Id. ¶¶ 19-21. MSP, in
their complaint, also alleges article six of the Master
Agreement governs the scope of the copyrights of the IOS
works between the Owner and Architect. Id. ¶
22; Doc. 1-2 PageID 19. Specifically, the Master Agreement
grants a nonexclusive license for the purpose of completing
the project. Doc. 1-2 PageID 19. Additionally, the
nonexclusive license allows for the owner to authorize
contractors, subcontractors, sub-subcontractors and the
Owner's consultants to reproduce portions of the IOS
works to complete the project. Id. The licenses
referenced in the Master Agreement also terminate when the
Architect rightfully terminates a Service Agreement under
section 8.3 and 8.4 of the Master Agreement. Id.
alleges four causes of action against the Defendants. Count I
alleges that all Defendants (including Kinney) infringed upon
the copyrights of the IOS works since June of 2018. Doc. No.
1 ¶¶ 24-31. MSP alleges in Count II that
Fireblocks, 100 ETS, and 115 ETS breached the Master
Agreement and Service Orders respectively by materially
breaching the agreements when they failed to pay as agreed.
Id. ¶¶ 32-39. In Count III, MSP alleges
that all defendants are unjustly enriched by the conveyance
and retention of the IOS works without payment. Id.
¶¶ 40-45. MSP finally alleges in Count IV all
defendants have committed conversion by appropriating the IOS
works and refusing to return them after a demand by MSP.
100 ETS, 115 ETS and Windsor brought the first Motion to
Dismiss pursuant to Federal Rule of Procedure 12(b)(6)
because of arbitration provisions within the Master
Agreement. Doc. No. 10; see Doc. No. 1-2 PageID
20-21 (Article 7 of the Master Agreement).
Dispute Resolution Provisions state in pertinent part:
“The Owner and Architect shall commence all claims and
causes of action, whether in contract, tort, or otherwise,
against the other arising out of or related to any
Service Agreement, with the method of binding dispute
resolution selected in this Master Agreement.” Doc. No.
1-2 PageID 20 (section 7.1.1 Master Agreement) (emphasis
added). “The Owner and Architect shall endeavor to
resolve claims, disputes and other matters in question
between them by mediation . . . administered by the
American Arbitration Association.” Id.
(section 7.2.2 Master Agreement) (emphasis added). “Any
claim, dispute or other matter in question arising out of or
related to a service agreement shall be subject to mediation
as a condition precedent to binding dispute
resolution.” Id. (Section 7.2.1 Master
Agreement). Finally, section 7.2.4 of the Master Agreement
stipulates that arbitration in accordance with section 7.3 is
the binding dispute resolution. Id.
Arbitration Clause states in pertinent part: “[A]ny
claim, dispute or other matter in question arising out of or
related to a Service Agreement subject to, but not resolved
by mediation shall be subject to arbitration . . .
administered by the AAA” Id. PageID 21
(section 7.3.1 Master Agreement). “Either party . . .
may [join] persons or entities substantially involved in a
common question of law or fact whose presence is required if
complete relief is to be accorded in arbitration, provided
that the party sought to be joined consents in
writing to such joinder.” Id. (section
22.214.171.124 Master Agreement) (emphasis added).
Defendants 100 ETS, 115 ETS, and Windsor all allege they are
parties to the Arbitration Agreement within the Master
Agreement. Doc. No. 13 at 5-6. Defendant Kinney brought the
second Motion to Dismiss pursuant to Federal Rule of Civil
Procedure 12(b)(6) for MSP failing to pursue arbitration, and
for not pleading sufficient facts to allow him to defend the
allegations. Doc. No. 12.
Fireblocks, 100 ETS and 115 ETS appear to be signatories to
Service Orders, which, based on the language of the Master
Agreement, merge with the Master Agreement into Service
Agreements. See Doc. Nos. 1-2, 1-3, 1-4, 1-5, 1-6.
As stated above, the Master Agreement has a binding
Arbitration Clause, which 100 ETS and 115 ETS seek to enforce
through their motion. Doc. No. 13 at 6. Defendants Windsor
and Kinney are not signatories to the Master Agreement or any
Service Order, but nonetheless wish to enforce the
Arbitration Clause against MSP. Id. at 5-6; Doc. No.
11 at 2. They assert that the joinder provision in section
126.96.36.199 entitles them to be a party to the Arbitration, and
the claims against them should similarly be dismissed. Doc.
No. 13 at 5-6.
Court will discuss the standard of review for the Motions to
Dismiss below. After the standard is discussed, the Court
will analyze the Motions to Dismiss based on applicable law
and the arguments of the parties.
Standard of Review for Failure to State a Claim
purpose of a Rule 12(b)(6) motion to dismiss is to allow a
defendant to test whether, as a matter of law, the plaintiff
is entitled to legal relief even if everything alleged in the
complaint is true.” Bihn v. Fifth Third Mortg.
Co., 980 F.Supp.2d 892, 897 (S.D. Ohio 2013) (citing
Mayer v. Mylod, 988 F.2d 635, 638 (6th
Cir. 1993)). Moreover, the purpose of the motion is to test
the formal sufficiency of the statement of the claim for
relief. Id. “[F]or the purposes of a motion to
dismiss, the complaint must be construed in the light most
favorable to the plaintiff and its allegations taken as
true.” Id. (citing Scheuer v. Rhodes,
416 U.S. 232 (1974)).
Sixth Circuit has held “that a party's
‘failure to pursue arbitration' in spite of a
compulsory arbitration provision means that the party
‘has failed to state a claim,' and a motion to
dismiss on such grounds is ‘properly construed as a
motion . . . under 12(b)(6).'” Knight v. Idea
Buyer, LLC, 723 Fed.Appx. 300, 301 (6th Cir. 2018)
(quoting Teamsters Local Union 480 v. United Parcel
Serv., Inc., 748 F.3d 281, 286 (6th Cir. 2014). District
Courts have also interpreted a party's motion to dismiss
based on arbitrability of claims as an affirmative defense
provided by section 3 of the Federal Arbitration Act, 9
U.S.C. §§ 1-16. E.g., Tower v. Amazon.com,
Inc., No. 15-cv-2405, 2016 U.S. Dist. LEXIS 109924, at
*3 (S.D. Ohio Aug. 18, 2016). The Court treats ...