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holding that because plaintiff's tortious interference with contractual relations claim was directly related to the claim that defendant breached the Agreement by resigning from plaintiff and forming an employment relationship with another company, the tort claim fell into the scope of the arbitration provision
Summary of this case from U.S. Claims, Inc. v. Saffren Weinberg, Llp.Opinion
CIVIL ACTION NO. 03-5319
January 8, 2004
MEMORANDUM
Plaintiff Nova CTI Caribbean ("Nova CTI") filed a Complaint against Defendant Tara L. Edwards ("Edwards") alleging breach of contract and tortious interference with contractual relations. Presently before the Court is Edwards' Motion to Dismiss pursuant to Federal Rules of Civil Procedure 12(b)(1), 12(b)(2), 12(b)(3), 12(b)(5) and 12(b)(6). For the reasons that follow, Edwards' Motion will be granted.
1. BACKGROUND
This case arose out of a June 1, 2002 Employment Agreement ("Agreement") entered into by the parties. Nova CTI is a Nevis corporation that has principal business offices in Philadelphia, Pennsylvania. In March, 2002, Nova CTI formed a joint venture with the corporate entity Nand Persuad LTD ("Nand Persuad") to create a telemarketing center in Guyana, South America. In furtherance of this venture, Nova CTI entered into the Agreement with Edwards to be the manager of the Guyana telemarketing center.
Nova CTI expended $350,000 in investment funds for the purpose of establishing the telemarketing center in Guyana. Moreover, Nova CTI made contacts with numerous United States companies for the purpose of bringing business to the telemarketing center in Guyana. Specifically, Nova CTI secured an agreement with Reed Business Information, U.S. ("RBI") to be one of the initial accounts to use the Guyana telemarketing center.
Sometime after June 2002, the employment relationship between Nova CTI and Edwards began to deteriorate. On September 20, 2002, Edwards officially resigned from her employment with Nova CTI. Edwards immediately commenced an employment relationship with Nand Persuad. At approximately the same time, the joint venture between Nova CTI and Nand Persuad ended and Nova CTI lost the RBI account to Nand Persuad.
Specifically, Edwards began working for an entity that Nand Persuad created called Nand Persuad International Communications.
On September 22, 2003, Nova CTI filed a two Count Complaint against Edwards alleging breach of contract (Count I) and tortious interference with contractual relations (Count II). In relation to the breach of contract claim, Nova CTI alleges that Edwards breached a non-compete clause in the Agreement and "diverted the business opportunity of RBI from Nova CTI Caribbean to Nand Persuad International Communications." (Compl. ¶ 28). In terms of the tortious interference with contractual relations claim, Nova CTI alleges that Edwards intentionally and improperly interfered with Nova CTI's contractual relations with two separate entities. First, Nova CTI claims that Edwards' interference with the contractual relation with Nand Persuad caused Nand Persuad to abandon the joint venture with Nova CTI. Second, Nova CTI alleges that Edwards interfered with the business relationship between Nova CTI and RBI by "securing a contract between RBI and Nand Persuad International Communications." (Id. ¶ 32).
Notably, the Agreement that both Nova CTI and Edwards signed contained a provision relating to the arbitration of certain disputes. The provision states that "any . . . controversy, claim, or dispute arising out of or relating to the terms and conditions of this Agreement shall be settled by arbitration before a mutually selected arbitrator to be in the Country of Nevis." (Id., Ex. A., ¶ 8). Edwards has filed the instant Motion to Dismiss, arguing that pursuant to the arbitration clause of the Agreement and the Federal Arbitration Act ("FAA"), Nova CTI's claims "aris[e] out of or relat[e] to the terms and conditions of th[e] Agreement" and, therefore, should be settled by arbitration. ConsEdwards claims that this dispute should not be before this Court.
2. STANDARD OF REVIEW
As previously stated, Edwards has filed the instant Motion to Dismiss based on multiple grounds. Edwards argues this Court lacks subject matter jurisdiction over the instant case pursuant to the arbitration clause in the Agreement and the FAA. Because this Court finds that the mandatory arbitration clause is applicable to all of Nova CTI's claims, it will not address the other issues raised in the Motion to Dismiss. See Federico v. Charterers Mut. Assurance Ass'n Ltd., 158 F. Supp.2d 565, 576 (E.D. Pa. 2001).
Nova CTI's Response to the Motion to Dismiss includes a Motion to Strike the Affidavit of Edwards that was attached to Edwards' original Motion. The Court will deny the Motion to Strike as moot because the Court did not consider the substance of the Affidavit in ruling on Edwards' Motion to Dismiss.
In relation to her argument under the arbitration clause in the Agreement, Edwards moves for dismissal of the Complaint pursuant to Rule 12(b)(1). A Rule 12(b)(1) motion deals with the issue of a court's subject matter jurisdiction. "The Motion would more properly have been brought under Rule 12(b)(6), because the existence of a valid arbitration clause does not technically deprive the Court of subject matter jurisdiction." Liveware Publ'g, Inc. v. Best Software, Inc., 252 F. Supp.2d 74, 78 (D. Del. 2003) (citing Nationwide Ins. Co. of Columbus, Ohio v. Patterson, 953 F.2d 44, 45 (3d Cir. 1991)). Instead, as one court noted, an arbitration clause "requires the Court to forego the exercise of jurisdiction in deference to the parties' contractual agreement to address in another forum those disputes which fall within the scope of the agreement to arbitrate." Id. at 79. Notwithstanding the appropriateness of a motion pursuant to Rule 12(b)(6), courts have allowed parties to petition for arbitration via a motion to dismiss for lack of subject matter jurisdiction. Thompson v. Nienaber, 239 F. Supp.2d 478, 483 (D.N.J. 2002). As in Thompson, the Court will allow Edwards to move pursuant to Rule 12(b)(1). The Court finds that the distinction between Rule 12(b)(1) and Rule 12(b)(6) is immaterial because pursuant to either ground, the arbitration clause requires arbitration of Nova CTI's claims.
A motion to dismiss pursuant to Rule 12(b)(1) may present either a facial or a factual challenge to subject matter jurisdiction. Mortensen v. First Fed. Sav. and Loan Ass'n, 549 F.2d 884, 891 (3d Cir. 1977). In the instant Motion, Edwards makes a facial attack on the Complaint because the argument pursuant to Rule 12(b)(1) is based on the language of the arbitration clause in the Agreement, which is attached to Nova CTI's Complaint. When the movant challenges subject matter jurisdiction based on the face of the complaint, the court must consider all allegations of the complaint as true and make all reasonable inferences in plaintiff's favor. Id. 3. DISCUSSION
Edwards relies on the FAA, as well as the arbitration provision contained in the Agreement, in arguing that this Court should dismiss Nova CTI's breach of contract and tortious interference with contractual relations claims. Edwards only response to this argument is to summarily request that this Court retain jurisdiction over the tortious interference with contractual relations claim if the Court finds that arbitration is appropriate. The Court concludes that the broad arbitration clause in the Agreement covers both Counts of Nova CTI's Complaint and that the Complaint should therefore be dismissed, as all issues are appropriate for arbitration.
A. FAA
The FAA is the foundation for a strong federal policy in favor of arbitration. 9 U.S.C. § 1; Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983). Section 2 of the FAA provides that a "written provision in . . . a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract . . . shall be valid, irrevocable, and enforceable. . . ." 9 U.S.C. § 2. In relation to the policy in favor of arbitration, the Supreme Court has emphasized that "any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability." Moses H. Cone Mem'l Hosp., 460 U.S. at 24-25.
The FAA further provides 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." 9 U.S.C. § 4. Section 3 of the FAA allows a party to seek a stay of proceedings before a district court when issues in a case are referable to arbitration pursuant to an arbitration agreement. Id. § 3. Notably, for purposes of the instant Motion, "[i]n addition to granting a stay and compelling arbitration where required by the FAA, the court in its discretion may also dismiss the action instead of staying it `if all claims involved in the action are arbitrable.'" Berkery v. Cross Country Bank, 256 F. Supp.2d 359, 364 (E.D. Pa. 2003) (quoting Seus v. John Nuveen Co., Inc., 146 F.3d 175, 179 (3d Cir. 1998)).
Three factors must be considered in analyzing the instant case under the FAA: (1) whether the FAA applies to this case; (2) whether there is valid arbitration agreement between the parties to arbitrate their disputes; and (3) whether Nova CTI's claims are within the scope of the arbitration clause. Goodwin v. Elkins Co., 730 F.2d 99, 108 (3d Cir. 1984). In this case, the parties do not dispute that the FAA applies to this action. Moreover, Nova CTI does not challenge the existence or validity of the agreement to arbitrate disputes. Thus, the central issue in this action is the scope of the arbitration provision in the Agreement. Specifically, whether the clause covers both Nova CTI's breach of contract claim and tortious interference with contractual relations claim.
The FAA applies to written arbitration clauses in contracts that evidence a transaction involving interstate or foreign commerce. 9 U.S.C. § 1, 2; Goodwin, 730 F.2d at 108-09; Roadway Package Sys., Inc., v. Kayser, No. 99-MC-111, 1999 WL 817724, at *4 (E.D. Pa. Oct. 13, 1999). "This is not a rigorous inquiry; in fact, the contract need only the slightest nexus with interstate commerce." Crawford v. W. Jersey Health Sys., 847 F. Supp. 1232, 1240 (D.N.J. 1994). The Supreme Court has emphasized that this requirement is met where "contractual activity facilitates or affects commerce, even tangentially." Id. (citing Prima Paint Corp. v. Flood Conklin Mfg. Co., 388 U.S. 395, 401-02 (1967)). The Supreme Court has also clearly stated the FAA governs all employment contracts except those of transportation workers. Tripp v. Renaissance Advantage Charter Sch., No. 02-9366, 2003 WL 22519433, at *3 (E.D. Pa. Oct. 8, 2003) (citing Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 119 (2001)). In the present case, there is a written arbitration provision in an employment contract requiring the parties to submit certain disputes to arbitration. Further, the employment relationship between Edwards and CTI impacts commerce. For example, Edwards employment facilitated Nova CTI's ability, from its principal business office in Philadelphia, to contact U.S. companies to bring business opportunities to the telemarketing center in South America (i.e. the RBI account. These factors indicate that the FAA is applicable in the instant action.
B. Scope of the Arbitration Clause
The Court must determine whether the arbitration provision at issue encompasses Nova CTI's breach of contract and tortious interference with contractual relations claims. The arbitration clause states that "any . . . controversy, claim, or dispute arising out of or relating to the terms and conditions of th[e] Agreement shall be settled by arbitration before a mutually selected arbitrator to be in the Country of Nevis." (Compl., Ex. A, ¶ 8). Edwards claims that this provision is broad enough to cover both claims. As previously discussed, Nova CTI's only direct response to this argument is to summarily request that this Court retain jurisdiction over the tortious interference with contractual relations claim if this Court finds that arbitration is appropriate.
The Court of Appeals for the Third Circuit ("Third Circuit") has directed that arbitration clauses should be construed broadly. Battaglia v. McKendry, 233 F.3d 720, 725 (3d Cir. 2000). Further, it is clear that
where the contract contains an arbitration clause, there is a presumption of arbitrability in the sense that `[a]n order to arbitrate the particular grievance should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute. Doubts should be resolved in favor of coverage.'Id. at 720 (quoting AT T Techs., Inc. v. Communications Workers of Am., 475 U.S. 643, 649 (1986)). In analyzing whether a claim falls within the scope of an arbitration provision, the "focus is on the factual underpinnings of the claim rather than the legal theory alleged in the complaint." Medtronic Ave, Inc. v. Advanced Cardiovascular Sys., Inc., 247 F.3d 44, 55 (3d Cir. 2001). In light of these basic principles, the Court finds that both claims in the instant dispute clearly fall within the ambit of the arbitration clause in the Agreement.
(1.) Breach of Contract Claim
As an initial matter, it is clear that Nova CTI's breach of contract claim falls within the scope of the arbitration provision. The breach of contract claim is based on terms and conditions of the Agreement that Edwards allegedly violated. Hence, this claim clearly qualifies as "arising out of or relating to the terms and conditions of th[e] Agreement" as stated in the arbitration provision. The Court finds that the breach of contract claim is appropriate for arbitration.
(2.) Tortious Interference with Contractual Relations Claim
Similarly, the Court finds that Nova CTI's tortious interference with contractual relations claim falls within the realm of the arbitration provision. Nova CTI's claim pursuant to this legal theory is two-pronged in the Complaint. (Compl. ¶¶ 29-36). First, Nova CTI alleges that Edwards interfered with Nova CTI's joint venture agreement with Nand Persuad. (Id. ¶¶ 31-33). Second, Nova CTI claims that Edwards interfered with the business relationship between Nova CTI and RBI. (Id. ¶ 32).
Both prongs of the tortious interference with contractual relations claim "aris[e] out of or relat[e] to the terms and conditions of th[e] Agreement." As previously stated, the Court must focus on the factual underpinnings of the claim instead of the legal theory in deciding if the claim falls within the scope of the arbitration clause. In the instant case, the alleged interferences arise out of the same facts as the breach of contract claim. Specifically, Edwards' interference with the joint venture between Nova CTI and Nand Persuad allegedly occurred when Edwards allegedly breached the non-compete clause by forming an employment relationship with Nand Persuad. Further, Edwards' alleged interference with Nova CTI's RBI account and misappropriation of that client was a direct result of Edwards forming a employment relationship with Nand Persuad in violation of the Agreement. This link between the breach of contract claim and the tortious interference with contractual relations claim is supported by the language of Nova CTI's Complaint. For example, in Nova CTI's breach of contract Count, it states that "Defendant Edwards breached the aforementioned contract when she began to compete against Nova CTI Caribbean and diverted the business opportunity of RBI from Nova CTI Caribbean to Nand Persuad International Communications." (Compl. ¶ 28). Thus, even Nova CTI's own Complaint displays that the factual underpinnings of the tortious interference with contractual relations claim were the same as for the breach of contract claim. As other courts have found, the fact that the separate claim arises out of the same facts as the breach of contract claim supports the conclusion that the arbitration provision is broad enough to cover this aspect of the parties' dispute. Troshak, II v. Terminix Int'l Co., L.P., No. 98-1727, 1998 WL 401693, at *6 (E.D. Pa. July 2, 1998) (interpreting substantially similar language in arbitration clause and finding that clause was broad enough to cover negligence claim since the tort claim arose out of the same facts as a breach of contract claim).
The Court's conclusion that the tortious interference with contractual relations claim "aris[es] out of or relat[es] to the terms and conditions of th[e] Agreement" is in accord with the decisions of other courts. P P Indus., Inc. v. Sutter Corp., 179 F.3d 861, 871-72 (10th Cir. 1999); Pa. Data Entry, Inc., v. Nixdorf Computer Corp., 762 F. Supp. 96 (E.D. Pa. 1990) (concluding that restitution, fraud, negligent misrepresentation and tortious interference with contractual relations claims were subject to arbitration). In P P Industries, Inc., the Court of Appeals for the Tenth Circuit ("Tenth Circuit") analyzed the scope of an arbitration clause to determine whether a tortious interference with contractual relations claim was arbitrable. The arbitration clause in that case was similar to the one in the instant case in that it provided that "[a]ny controversy, claim, or breach arising out of or relating to this Agreement shall be arbitrable." P P Industries, Inc., 179 F.3d at 872. The Tenth Circuit affirmed the District Court's determination that the tortious interference with contractual relations claim arose out of or was related to the agreement at issue. Id. The Court agreed with the District Court's determination that all alleged contractual interferences by the defendant with the plaintiff's contracts were based on actions that the defendant took when he breached the agreement at issue by terminating it. Id. Specifically, the Tenth Circuit agreed with the District Court that the alleged contractual interferences were based on the manner in which the defendant allegedly breached the contract and were therefore arbitrable as related to the agreement at issue. Id.
Similarly, in the instant action, Nova CTI's tortious interference with contractual relations claim is directly related to the claim that Edwards breached the Agreement by resigning from Nova CTI and forming an employment relationship with Nand Persuad. Nova CTI's claim that Edwards interfered with its joint venture with Nand Persuad and its business relations with a client are based on the manner in which Edwards breached the Agreement. Thus, this claim clearly falls within the broad scope of the arbitration agreement as it is at least "relat[ed]" to the Agreement.
In summary, the Court finds that the parties entire dispute falls within the ambit of the broad arbitration clause in the Agreement. Both the breach of contract and tortious interference with contractual relations claims "aris[e] out of or relat[e] to the terms and conditions of th[e] Agreement." Notably, there is no language in the Agreement indicating that the parties wanted these types of claims to be decided by the courts rather than through arbitration. Thus, both Counts of Nova CTI's Complaint are arbitrable.
4. CONCLUSION
For the reasons set forth above, the Court concludes that the instant dispute falls within the scope of the arbitration provision in the Agreement and is therefore appropriate for arbitration. As previously noted, because this Court finds that the arbitration clause is applicable to all of Nova CTI's claims, it will not address the other issues raised in the Motion to Dismiss. Accordingly, the Court will grant the Defendant's Motion to Dismiss.
An appropriate Order follows.
ORDER
AND NOW, this 8th day of January, 2004, upon consideration of the Defendant's Motion to Dismiss (Doc. No. 5), and the Response and Reply thereto, it is hereby ORDERED that the said Motion is GRANTED.IT IS FURTHER ORDERED that Plaintiff's Motion to Strike the Affidavit of Defendant (Doc. No. 7) is DENIED AS MOOT.