Opinion
20-CV-47 (JLS)
04-16-2020
POOL DEALS, LLC, Plaintiff, v. UNITED PARCEL SERVICE, INC., Defendant.
D. Charles Roberts, Jr., Kevin George Cope, Thomas S. Lane, Webster Szanyi, LLP, Buffalo, NY, for Plaintiff. Christina L. Golden Ademola, Joshua A. Roy, Morrison & Foerster LLP, New York, NY, for Defendant.
D. Charles Roberts, Jr., Kevin George Cope, Thomas S. Lane, Webster Szanyi, LLP, Buffalo, NY, for Plaintiff.
Christina L. Golden Ademola, Joshua A. Roy, Morrison & Foerster LLP, New York, NY, for Defendant.
DECISION
JOHN L. SINATRA, JR., UNITED STATES DISTRICT JUDGE
The Court previously granted defendant United Parcel Service, Inc. ("UPS")'s motion to compel arbitration and to stay this case pending the outcome of arbitration, and ordered the parties to proceed to arbitration, at oral argument on March 3, 2020. This written decision memorializes the Court's March 3 oral decision and order.
FACTS AND PROCEDURAL HISTORY
This case stems from a dispute regarding shipping costs that UPS charged to plaintiff Pool Deals, LLC ("Pool Deals") and to Pool Deals' third-party suppliers.
Pool Deals is an online retailer of pool products. Dkt. 28-1 ¶ 2. Most of Pool Deals' sales occur through third-party suppliers. Id. ¶ 3. For these sales, Pool Deals interfaces with customers and third-party suppliers, directly connecting its customers with the manufacturers. Id. When a customer places an order with Pool Deals, Pool Deals satisfies the order by purchasing the product from the supplier, and the supplier ships the product directly to the customer. Id.
Pool Deals has used UPS for shipping services since 2010. Dkt. 28-1 ¶ 6. The parties' relationship is governed by a Carrier Agreement, the operative version of which was signed by Charlie Goss, President of Pool Deals, and Ralph Russo, senior account executive at UPS who handled Pool Deals' account, and took effect on December 3, 2018 (the "Carrier Agreement"). Dkt. 15-1; see Dkt. 28-1 ¶ 6. Consistent with Pool Deals' business model, almost all products shipped under the Carrier Agreement are shipped by third-party suppliers and not by Pool Deals. See Dkt. 28-1 ¶ 5.
Shortly after the Carrier Agreement took effect, Pool Deals' shipping costs increased significantly. See Dkt. 1-1, at 9 ¶ 20. Pool Deals tried to resolve its dispute about this increase with Russo, as it alleges it has done in the past. Id. ¶¶ 21-37. During that time, UPS tried to collect Pool Deals' unpaid account balance from Pool Deals and from Pool Deals' third-party suppliers that shipped the products underlying the disputed charges. Id. ¶¶ 29, 32, 36. UPS told the third-party suppliers that incurred disputed charges that it would shut down their accounts if they did not commit to pay down the unpaid invoices by December 30, 2019. Id. ¶ 38.
Page references to Dkt. 1-1 are to the numbering automatically generated by CM/ECF, which appears in the header of each page. But unless otherwise noted, page references are to the numbers in the footer of the parties' submissions and not to the numbering automatically generated by CM/ECF.
On December 26, 2019, Pool Deals filed a state court complaint against UPS regarding the disputed charges. Dkt. 1-1. That same day, Pool Deals sought and obtained a temporary restraining order from the state court judge, which enjoined UPS from taking any further action to collect the disputed charges from Pool Deals or from the third-party suppliers. Id. at 2-3. UPS removed the case to this Court on January 13, 2020. See Dkt. 1.
Pool Deals then asked this Court to extend the state court temporary restraining order, see Dkt. 8, which the Court did until the conclusion of the preliminary injunction hearing, see Dkt. 10. That same day, UPS moved to compel arbitration and to stay this case pending arbitration, based on an arbitration provision in the UPS Tariff/Terms and Conditions of Service (the "UPS Terms"), which the Carrier Agreement incorporates by reference. See Dkts. 12-16. The Court coordinated briefing on UPS's motion to compel arbitration and Pool Deals' motion for preliminary injunction. See Dkts. 11, 17. On March 3, 2020, the parties appeared for argument on UPS's motion to compel arbitration and for a hearing on Pool Deal's motion for preliminary injunction. See Dkts. 34, 40. The Court granted UPS's motion to compel arbitration and to stay from the bench and ordered the parties to arbitration. Dkt. 46, at 19:23-21-9. It then proceeded to the preliminary injunction hearing and reserved decision on Pool Deals' motion. Dkt. 46, at 26:1-2; id. at 120:6-19; see Nicosia v. Amazon.com, Inc. , 834 F.3d 220, 238 (2d Cir. 2016) ("Generally, courts should consider the merits of a requested preliminary injunction even where the validity of the underlying claims will be determined in arbitration.") (internal quotations and citation omitted).
The parties later asked to reschedule the preliminary injunction hearing to March 3, 2020, and agreed to extend the temporary restraining order until the Court issued a decision on Pool Deals' motion for preliminary injunction. See Dkts. 22-23.
After March 3, Pool Deals commenced arbitration and requested emergency interim relief, and UPS agreed this Court's temporary restraining order would remain in place until the emergency arbitrator decided Pool Deals' request. See Dkt. 53. Consistent with the Court's statement that any preliminary injunction it might grant would not be in effect for longer than it would take an emergency arbitrator to decide Pool Deals' request, see Dkt 46, at 22:12-24:21, the Court granted Pool Deals' motion for preliminary injunction to the extent of the parties' agreement and denied the remainder of the motion without prejudice to the emergency arbitrator's interim relief determination. See Dkt. 54. This decision therefore addresses only UPS's motion to compel arbitration and to stay.
See Benihana, Inc. v. Benihana of Tokyo, LLC , 784 F.3d 887, 899 (2d Cir. 2015) (noting that "[i]f the parties have agreed to arbitrate a dispute, a court has no business weighing the merits of the claims") (internal quotations, alterations, and citation omitted).
JURISDICTION
UPS removed this case to federal court based on diversity jurisdiction. See Dkt. 1. Because the parties are citizens of different states and the dispute involves more than $75,000, this Court has diversity jurisdiction.
In particular, district courts "have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75,000 ... and is between ... citizens of different [s[tates ...." 28 U.S.C. § 1332(a)(1). A corporation is "a citizen of every [s]tate ... by which it has been incorporated and of the [s]tate ... where it has its principal place of business ...." 28 U.S.C. § 1332(c)(1). "[P]rincipal place of business refers to the place where the corporation's high level officers direct, control, and coordinate the corporation's activities"—in other words, the corporation's "nerve center," which typically is its headquarters. See Hertz Corp. v. Friend , 559 U.S. 77, 80-81, 130 S.Ct. 1181, 175 L.Ed.2d 1029 (2010) (internal quotations and citations omitted).
Where a party seeks injunctive relief, "the amount in controversy is measured by the value of the object of the litigation." American Standard, Inc. v. Oakfabco, Inc. , 498 F. Supp. 2d 711, 717 (S.D.N.Y. 2007). This value is "the monetary value of the benefit that would flow to the plaintiff" if the Court granted the request for injunctive relief. Id.
Pool Deals is a New York LLC with a principal place of business in New York. See Dkt. 1, at 2 ¶ 9. Pool Deals has one member, Charlie Goss, whose principal residence is in New York. See id. at 3 ¶ 10. UPS is an Ohio corporation with a principal place of business in Atlanta, Georgia. See id. ¶ 11. Pool Deals seeks injunctive relief from at least $290,000 in disputed shipping charges. See id. at 3 ¶¶ 13, 14. Therefore, this Court has diversity jurisdiction.
LEGAL STANDARD
Courts presented with a motion to compel arbitration consider: (1) whether the parties agreed to arbitrate; and (2) the scope of the parties' agreement to arbitrate. See Daly v. Citigroup, Inc. , 939 F.3d 415, 421 (2d Cir. 2019). Consistent with "the strong federal policy favoring arbitration," courts "resolve any doubts concerning the scope of arbitrable issues in favor of arbitrability" and will compel arbitration unless "the arbitration clause is not susceptible of an interpretation that covers the asserted dispute." Id. (internal quotations and citation omitted); see also Pagaduan v. Carnival Corp. , 709 F. App'x 713, 715 (2d Cir. 2017) ("Questions concerning the language or construction of an arbitration agreement must be addressed with a healthy regard for the federal policy favoring arbitration.") (internal quotations and citation omitted).
A standard similar to the summary judgment standard applies to motions to compel arbitration. See Glencore Ltd. v. Degussa Engineered Carbons L.P. , 848 F. Supp. 2d 410, 423 (S.D.N.Y. 2012). If the parties do not "identif[y] any material factual dispute bearing on the central issue of whether [they] entered into a contract that included a mandatory arbitral provision," a court may summarily resolve the motion to compel arbitration. Id. at 424.
DISCUSSION
UPS argues that Pool Deals agreed to arbitrate when it accepted the UPS Terms that contain the arbitration provision—both by signing the Carrier Agreement, which incorporated the UPS Terms by reference, and by using UPS's WorldShip® system to ship packages. See Dkt. 13, at 3. UPS asserts that the Court must stay this action pending arbitration if it grants UPS's motion to compel. See id. at 11-12. Pool Deals does not disagree. See Dkt. 46, at 21:10-14.
Pool Deals argues that it did not agree to arbitrate because the Carrier Agreement did not incorporate by reference the UPS Terms that contain the arbitration provision. See Dkt. 28, at 5-6. Even if incorporated by reference, Pool Deals argues that the UPS Terms and their arbitration provision do not govern the parties' dispute, which relates to billing and not to UPS's services. See id. at 7-9. Pool Deals further argues that it is not bound by the UPS Terms or their arbitration provision based on its use of UPS's WorldShip® system. See id. at 9-14. Finally, Pool Deals argues that UPS waived arbitration of the parties' dispute when it retained a third party to collect on the unpaid invoices. See Dkt. 28, at 14-15.
Because the Court concludes that Pool Deals assented to the UPS Terms by entering the Carrier Agreement, it need not—and does not—decide whether Pool Deals agreed to arbitrate by using WorldShip®. See Dkt. 46, at 8:12-19.
I. The parties agreed to arbitrate by entering the Carrier Agreement.
At all times relevant to this dispute, the relationship between Pool Deals and UPS was governed by the Carrier Agreement. See Dkt. 15-1. Neither party disputes the validity of the Carrier Agreement. Rather, Pool Deals asserts that the Carrier Agreement does not incorporate the UPS Terms by reference, so Pool Deals did not assent to—and therefore is not bound by—the UPS Terms or the arbitration provision they contain.
Contracts may incorporate other documents by reference where they describe the other documents "in such clear and unambiguous terms" that the identity of the other documents "can be ascertained beyond reasonable doubt." Pagaduan , 709 F. App'x at 715. Courts may decide whether a document is incorporated by reference as a matter of law, even if the parties urge contrary interpretations. See id. at 715-16.
Absent "fraud or other wrongful conduct, a party who signs a written contract is presumed to know its contents and to assent to them, and is therefore bound by its terms and conditions." Progressive Cas. Ins. Co. v. C.A. Reaseguradora Nacional De Venezuela , 991 F.2d 42, 46 (2d Cir. 1993). Claims that a party "was unaware of" the incorporated terms, "was never told about" the terms, and "never consented to incorporation by reference of any additional terms" do not "rebut[ ] the powerful presumption in favor of enforcing freely negotiated contracts, especially in the arbitration context." Pagaduan , 709 F. App'x at 716.
Here, the UPS Terms are incorporated into the Carrier Agreement as follows:
All Services provided by UPS shall be pursuant to the UPS Rate and Service Guide and UPS Tariff/Terms and Conditions of Service in effect at the time of shipping, each of which are incorporated herein by reference and which may be subject to change without prior notice and which, together with this Agreement, are the entire agreement and understanding between Customer and UPS relating to the relationship under this Agreement , superseding all prior or contemporaneous agreements or understandings....
Dkt. 15-1 (emphasis added). This passage, which identifies the UPS Terms by title, clearly and unambiguously describes the UPS Terms and allows Pool Deals to identify UPS Terms beyond reasonable doubt. Pool Deals' suggestion that the "subject to change" language precludes concluding that the UPS Terms were incorporated by reference, see Dkt. 28, at 6, does not alter the analysis—especially where the UPS Terms have contained a substantially similar arbitration provision at all times relevant to this dispute. See Dkt. 14 ¶¶ 3, 5; Dkt. 15 ¶ 3.
Pool Deals does not allege fraud or overreaching by UPS related to the UPS Terms or their arbitration provision. It alleges misrepresentations regarding "specific levels of overall savings and specific percentages of overall savings" in shipping costs, but alleges nothing about misrepresentations related to the UPS Terms or their contents. See Dkt. 1-1, at 8 ¶¶ 15-18; Dkt. 28-1 ¶13. Pool Deals' claims that it was not advised that it would be bound by the UPS Terms, was not instructed to retrieve a copy of the UPS Terms, was not advised that it was agreeing to arbitrate all claims against UPS by entering the Carrier Agreement, and was not aware of the UPS Terms until this litigation are unavailing. See Dkt. 28-1 ¶¶ 14-16; see also Dkt. 28, at 6. Pool Deals is presumed to know the contents of the Carrier Agreement and the documents and terms it incorporates and is presumed to assent to them. See Progressive Cas. Ins. Co. , 991 F.2d at 46.
Pool Deals cannot avoid assent to the arbitration provision by arguing that the Carrier Agreement did not explicitly reference the arbitration provision. See Pagaduan , 709 F. App'x at 716 (holding that contract incorporated arbitration provision by reference where the contract "d[id] not contain an arbitration provision on its face but did "reference secondary documents ... that ... call for arbitration"); Aceros Prefabricados, S.A. v. TradeArbed, Inc. , 282 F.3d 92, 97 (2d Cir. 2002) (noting that the Second Circuit has "specifically found that parties were bound to arbitrate under arbitration clauses they never signed, where those clauses were contained on other documents that were incorporated by reference").
As explained above, Pool Deals is presumed to know the contents of the UPS Terms, which clearly and prominently present the arbitration provision. The arbitration provision appears in Section 54 of the UPS Terms, under the heading "Claims and Legal Actions: Individual Binding Arbitration of Claims ." Dkt. 14-1, at 27 (bold in original). This same heading appears in the Table of Contents, so one need not have reviewed the entire document to locate the arbitration provision. See Dkt. 14-1, at 4. Pool Deals' failure to review the UPS Terms before entering the Carrier Agreement does not release it from the obligation to arbitrate its claims against UPS.
Page references to Dkt. 14-1 are to the numbering automatically generated by CM/ECF.
II. The arbitration provision covers the parties' dispute.
The incorporation by reference appears in the Service section of the Carrier Agreement. See Dkt. 15-1. According to Pool Deals, this means that the UPS Terms are incorporated only for purposes of the Services section, and the arbitration provision applies only to disputes about services—not to billing disputes like the one here. See Dkt. 28, at 7-8.
This argument overlooks the uncontested fact that the parties' dispute is about pricing and billing for services. See Dkt. 1-1, at 9 ¶¶ 20-27. And the Carrier Agreement recognizes that "Services" and "Pricing" are intertwined. See Dkt. 15-1 (stating, in the Pricing section, that "UPS will provide the pickup and delivery services (‘Services’) as set forth below subject to the terms of this Agreement"; and stating, in the Service section, that "[a]ll Services provided by UPS shall be pursuant to the ... UPS Tariff/Terms and Conditions of Service").
Pool Deals does not argue that the arbitration provision itself does not cover the parties' billing dispute. Nor could it. The provision states that "any controversy or claim, whether at law or equity, arising out of or related to the provision of services by UPS ... shall be resolved in its entirety by individual ... binding arbitration." Dkt. 14-1, at 27. The arbitration provision applies to this dispute about invoices related to shipping services UPS provided to Pool Deals, and provided to Pool Deals' third-party suppliers at Pool Deals' behest.
Pool Deals also argued—for the first time at oral argument—that the UPS Terms could not have been incorporated by reference into the Carrier Agreement as a whole because the Custom Payment Terms section of the Carrier Agreement specifically references the UPS Terms. See Dkt. 46, at 13:18-15:4. This argument does not change the Court's analysis because the UPS Terms are incorporated into the Custom Payment Terms section of the Carrier Agreement for a specific purpose, which is different from the UPS Terms—and the arbitration specifically—applying to "[a]ll Services provided by UPS." See Dkt. 15-1.
III. Pool Deals did not waive arbitration.
Finally, UPS did not waive arbitration of Pool Deals' claims by sending the unpaid invoices to collections.
"[W]aiver of the right to arbitration is not to be lightly inferred." Cotton v. Slone , 4 F.3d 176, 179 (2d Cir. 1993) (internal quotations and citation omitted). Courts analyzing claims of waiver consider: "(1) the time elapsed from when litigation was commenced until the request for arbitration; (2) the amount of litigation to date, including motion practice and discovery; and (3) proof of prejudice." Chen-Oster v. Goldman, Sachs & Co. , No. 10 Civ. 6950, 449 F.Supp.3d 216, 234 (S.D.N.Y. Mar. 26, 2020) (quoting Louisiana Stadium & Exposition Dist. v. Merrill Lynch, Pierce, Fenner & Smith Inc. , 626 F.3d 156, 159 (2d Cir. 2010) ). Courts may infer waiver where a party "engages in protracted litigation that results in prejudice to the opposing party." Cotton , 4 F.3d at 179. Sufficient prejudice exists where the party seeking to compel arbitration "engages in discovery procedures not available in arbitration, makes motions going to the merits of an adversary's claims, or delays invoking arbitration rights while the adversary incurs unnecessary delay or expense." Id. (citations omitted).
The question of waiver here is not a close one. First, UPS did not delay in seeking to compel arbitration. UPS moved to compel arbitration three days after Pool Deals moved for a preliminary injunction and the same day this Court set a briefing schedule and hearing on Pool Deals' motion for preliminary injunction—which was only one month after Pool Deals filed its complaint in state court and was before UPS answered the complaint. See Dkts. 1-1, 11, 12. Second, motion practice so far has included only UPS's motion to compel arbitration, Pool Deals' motion for preliminary injunction, and the parties' unopposed motions to seal. There has been no discovery. Third, Pool Deals does not specify any prejudice from proceeding with arbitration; prejudice is not inferred here, where only Pool Deals' motion tested the merits of its claims.
Pool Deals does not cite any authority for its claim that pursuing efforts to collect unpaid invoices—relief unrelated to litigation—constitutes waiver. In any event, there is no waiver on these facts.
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IV. Stay pending arbitration.
UPS also asks the Court to stay this action pending arbitration.
The Court "shall on application of one of the parties stay the trial of the action until ... arbitration has been had" after determining that a matter is referable to arbitration pursuant to a written arbitration agreement. See 9 U.S.C. § 3. In other words, after the Court determines that a party's claims are covered by a valid agreement to arbitrate, "a stay is mandatory." Campeau Corp. v. May Dep't Stores Co. , 723 F. Supp. 224, 227 (S.D.N.Y. 1989).
The Court determined that all of Pool Deals' claims are subject to arbitration pursuant to Section 54 of the UPS Terms, incorporated by reference into the Carrier Agreement. UPS asked the Court to stay this action pending arbitration. This action is stayed pending the outcome of the parties' arbitration, pursuant to 9 U.S.C. § 3.
CONCLUSION
For the reasons stated above and at oral argument on March 3, 2020, this decision sets forth in detail the Court's reasons for its GRANT of UPS's motion to compel arbitration and to stay this action pending that arbitration (Dkt. 12).