Opinion
Case No. 8:17-cv-3401-DCC-JDA
07-23-2018
Michael C. Rock, individually and as successor by dissolution to K-Cor, Inc., Plaintiff, v. Solar Rating & Certification Corporation, Defendant.
REPORT AND RECOMMENDATION OF THE MAGISTRATE JUDGE
This matter is before the Court on a motion to dismiss and to compel arbitration filed by Defendant Solar Rating & Certification Corporation ("SRCC"). [Doc. 7.] On May 10, 2018, the Honorable Donald C. Coggins, Jr., referred the motion to the undersigned magistrate judge [Doc. 15], who is authorized to review the motion and to provide a report and recommendation to the District Court.
PROCEDURAL HISTORY
Plaintiff commenced this action by filing a Complaint in the Anderson County Court of Common Pleas on September 22, 2017, alleging that SRCC breached its contract with Plaintiff. [Doc. 1-1.] Thereafter, SRCC removed the case to this Court on diversity jurisdiction grounds. [Doc. 1.] On December 21, 2017, SRCC filed a motion to dismiss and to compel arbitration. [Doc. 7.] Plaintiff filed a response in opposition on January 4, 2018 [Doc. 8], to which SRCC filed a reply on January 11, 2018 [Doc. 9]. The motion is now ripe for review.
BACKGROUND
This matter stems from an alleged breach of contract between Plaintiff and SRCC. [See Doc. 1-1.] In the Complaint, Plaintiff alleges that he is an inventor who developed a unique solar collector unit designed for home use and capable of efficiently heating water using solar energy. [Id. at 4 ¶ 5.] Plaintiff contends that he expended considerable sums of money in developing his product and secured patents for his invention. [Id. at 4 ¶ 6.] Plaintiff incorporated a business, known as K-Cor, Inc., to own Plaintiff's intellectual property and the products associated therewith. [Id. at 4 ¶ 7.] Plaintiff invented the "Rocket Dome" solar collector, which incorporated an innovative design featuring a curved collection surface and a dome covering the top of the collector. [Id. at 4 ¶ 8.] To facilitate the testing, production, and marketing of the Rocket Dome, Plaintiff sought to standardize production and to ensure compliance with all requirements for necessary testing prior to market entry. [Id. at 4 ¶ 9.] Plaintiff alleges that he developed a network of distributors who were prepared to market and sell the Rocket Dome once testing had been completed and production was underway. [Id. at 4 ¶ 10.]
K-Cor filed for dissolution on December 15, 2015. [Doc. 1-1 at 3 ¶ 2.] Plaintiff, who was the sole owner of K-Cor, is the successor by dissolution to any claims owned by K-Cor at the time of dissolution. [Id.] --------
In 2014, Plaintiff entered into a contract with SRCC to perform the required testing of the Rocket Dome, including testing for durability, functionality, and efficiency. [Id. at 5 ¶¶ 11-12.] Plaintiff contends that SRCC contracted with third-parties to conduct the testing, including the North Carolina State University ("NCSU"), through its North Carolina Clean Energy Technology Center, a lab certified to conduct testing pursuant to SRCC guidelines. [Id. at 5 ¶ 13.] Pursuant to Plaintiff's contract with SRCC, the Rocket Dome underwent testing to determine its instantaneous thermal efficiency ("efficiency rating"). [Id. at 5 ¶ 14.] SRCC was supposed to use standard testing methods and definitions. [Id. at 5 ¶ 15.]
Plaintiff alleges, however, that SRCC performed multiple calculations that resulted in an efficiency rating that was inaccurate and not in conformity with appropriate standards. [Id. at 6 ¶ 18.] Due to its design, the Rocket Dome did not fit within SRCC's testing protocol, and the standards used by SRCC did not take the Rocket Dome's unique design into consideration. [Id. at 6-7 ¶ 22.] SRCC refused to alter its testing methodology accordingly, causing the actual functionality and thermal efficiency of the Rocket Dome to be inaccurate and misleading. [Id. at 6-7 ¶¶ 22-23.] According to Plaintiff, despite being informed of the inaccuracy, SRCC deliberately chose to report only the inaccurate efficiency rating based on the incorrect methodology it applied. [Id. at 7 ¶ 24.] SRCC reported the inaccurate results of its testing on its publicly available website and in other places. [Id. at 7 ¶ 25.] As a result of SRCC's published inaccurate information about the Rocket Dome, Plaintiff was unable to sell his product and the distributors were no longer interested in marketing the Rocket Dome to potential customers. [Id. at 8 ¶ 29.]
In response, Plaintiff commenced this action and, in his Complaint, asserts causes of action for breach of contract [id. at 8-9 ¶¶ 29-35] and for product disparagement [id. at 9-10 ¶¶ 36-46]. SRCC now seeks to compel arbitration of the claims alleged in the Complaint. [See Doc. 7.]
APPLICABLE LAW
Motion to Compel Arbitration
The Federal Arbitration Act ("FAA") establishes a "strong federal public policy in favor of enforcing arbitration agreements" and is designed to "ensure judicial enforcement of privately made agreements to arbitrate." Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 217, 219 (1985). The FAA was enacted "in 1925 in order 'to reverse the longstanding judicial hostility to arbitration agreements that had existed at English common law and had been adopted by American courts, and to place arbitration agreements on the same footing as other contracts.'" Snowden v. CheckPoint Check Cashing, 290 F.3d 631, 639 (4th Cir. 2002) (quoting Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24 (1991)). "Underlying this policy is Congress's view that arbitration constitutes a more efficient dispute resolution process than litigation." Adkins v. Labor Ready, Inc., 303 F.3d 496, 500 (4th Cir. 2002) (citation omitted).
The FAA provides that arbitration clauses in contracts 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. Under the FAA, a district court must compel arbitration and stay court proceedings if the parties have agreed to arbitrate their dispute. Id. §§ 2, 3. But, if the validity of the arbitration agreement is in issue, a district court must first decide if the arbitration clause is enforceable against the parties. Id. § 4. "'[A]s a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration.'" Drews Distrib., Inc. v. Silicon Gaming, Inc., 245 F.3d 347, 349 (4th Cir. 2001) (quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983)). "A court should not deny a request to arbitrate an issue 'unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute.'" Id. at 349-50 (quoting United Steelworkers of Am. v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582-83 (1960)). Nevertheless, "a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit." Warrior & Gulf Navigation Co., 363 U.S. at 582.
A party seeking to compel arbitration must do so by establishing the following four elements: (1) the existence of a dispute between the parties; (2) a written agreement that includes an arbitration provision purporting to cover the dispute; (3) the relationship of the transaction, as evidenced by the agreement, to interstate or foreign commerce; and (4) the failure, neglect, or refusal of a party to arbitrate the dispute. Am. Gen. Life & Accident Ins. Co. v. Wood, 429 F.3d 83, 87 (4th Cir. 2005); see also Whiteside v. Teltech Corp., 940 F.2d 99, 102 (4th Cir.1991); Energy Absorption Sys. v. Carsonite Int'l, 377 F. Supp. 2d 501, 504 (D.S.C. 2005). "[E]ven though arbitration has a favored place, there still must be an underlying agreement between the parties to arbitrate." Adkins, 303 F.3d at 501 (internal quotations and citation omitted). "Whether a party agreed to arbitrate a particular dispute is a question of state law governing contract formation." Id. (citing First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 944 (1995)). "[T]he 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, 81 (2000). Thus, where a valid arbitration agreement exists and covers the claims at issue, this Court has "no choice but to grant a motion to compel arbitration." Adkins, 303 F.3d at 500 (4th Cir. 2002).
Motion to Dismiss
The FAA requires a court to stay "any suit or proceeding" pending arbitration of "any issue referable to arbitration under an agreement in writing for such arbitration, and "[t]his stay-of-litigation provision is mandatory." Adkins, 303 F.3d at 500; see also 9 U.S.C. § 3. But, the Fourth Circuit has also held that if all of the claims asserted in a complaint are subject to arbitration, dismissal of the complaint is "an appropriate remedy." Choice Hotels Int'l, Inc. v. BSR Tropicana Resort, Inc., 252 F.3d 707, 709-10 (4th Cir. 2001). Although the Fourth Circuit has acknowledged the inconsistency between its opinions on this issue, see Aggarao v. MOL Ship Mgmt. Co., 675 F.3d 355, 376 n.18 (4th Cir. 2012) ("There may be some tension between our decision . . . indicating that a stay is required when the arbitration agreement 'covers the matter in dispute'—and Choice Hotels—sanctioning dismissal 'when all of the issues presented . . . are arbitrable.'"), presently in this Circuit, a district court must stay an action pending arbitration of any arbitrable claims, with the exception that it may instead dismiss an action if all claims asserted are arbitrable. See Weckesser v. Knight Enterprises S.E., LLC, 228 F. Supp. 3d 561, 564 (D.S.C. 2017).
DISCUSSION
SRCC seeks to compel arbitration of the claims alleged in Plaintiff's Complaint. [Doc. 7 at 1.] SRCC also asks the Court to dismiss Plaintiff's Complaint. [Id.] The Court will address each issue below.
Motion to Compel Arbitration
SRCC argues that the claims raised in the Complaint are subject to an arbitration agreement. [Doc. 7-1 at 1, 3.] Plaintiff, on the other hand, counters that he should not be compelled to arbitration. [Doc. 8.] Specifically, Plaintiff contends that SRCC has failed to prove that the Contract between the parties contains an agreement to arbitrate. [Id. at 3-4.] Plaintiff also contends that, to the extent the Court finds SRCC met its burden of proving the existence of an agreement to arbitrate, any such arbitration agreement is unconscionable and therefore unenforceable. [Id. at 4-6.]
As noted, a party seeking to compel arbitration must do so by establishing the following four elements: (1) the existence of a dispute between the parties; (2) a written agreement that includes an arbitration provision purporting to cover the dispute; (3) the relationship of the transaction, as evidenced by the agreement, to interstate or foreign commerce; and (4) the failure, neglect, or refusal of a party to arbitrate the dispute. The Court will evaluate the parties' arguments and apply each of the elements of the four-part test to compel arbitration outlined above.
Existence of a Dispute and Refusal to Arbitrate
As an initial matter, the parties' submissions show, and neither party has denied, (1) that a dispute exists between the parties and (2) that Plaintiff has refused to arbitrate. Thus, the first and fourth elements are met.
Relationship to Interstate Commerce.
The transaction between the parties involves interstate commerce as defined in the FAA. [Doc. 7-1 at 5-6.] The FAA defines "commerce" to include "commerce among the several States." 9 U.S.C. § 1. "[T]he term 'involving commerce' in the FAA [is] the functional equivalent of the more familiar term 'affecting commerce'-words of art that ordinarily signal the broadest permissible exercise of Congress' Commerce Clause power." Citizens Bank v. Alafabco, 539 U.S. 52, 56 (2003).
As alleged in the Complaint, K-Cor, the company created to own Plaintiff's intellectual property and the products associated therewith, was a South Carolina corporation. [Doc. 1-1 at 3 ¶ 2.] SRCC is a Florida corporation. [Id. at 3-4 ¶ 3.] NCSU is a political subdivision of the State of North Carolina. [Id.] As Plaintiff alleges, SRCC and NCSU provided K-Cor with services, including testing, which were performed, in part, at the North Carolina Clean Energy Technology Center on NCSU's campus in Raleigh, North Carolina. [Id. at 5 ¶ 13.] Based on these allegations, it is clear that the transaction involved interstate commerce. Plaintiff makes no argument to the contrary in his submissions. Therefore, the undersigned finds that the Program Agreement involves interstate commerce and is subject to the FAA.
Existence of an Agreement to Arbitrate Covering the Dispute
As to the second element, requiring a written agreement that includes an arbitration provision covering the dispute, the parties disagree as to whether such an agreement exists. As noted, Plaintiff alleges in his Complaint that the parties entered into a valid and enforceable Contract, wherein SRCC agreed to evaluate the efficiency of the Rocket Dome, among other things, and to report accurate results. [Doc. 1-1 at 8 ¶¶ 30-31.] Despite referencing the Contract in the Complaint, Plaintiff did not attach a copy of the Contract to his Complaint.
SRCC, on the other hand, attached a document, entitled "SRCC™ OG-100 Certification Program Agreement" ("Program Agreement"), to its motion to compel arbitration, which SRCC contends is the Contract between the parties. [Doc. 7-2.] Paragraph 16 of the Program Agreement provides for "Dispute Resolution" as follows:
All disputes concerning product certification will be resolved consistent with the SRCC Certification and Approval Appeal Policy. Any questions arising from interpretation of this Agreement shall be settled through discussion between the Parties in good faith. If such matters or questions are not settled between the Parties, the Parties agree that all disputes arising from, or related to, this Agreement shall be resolved through binding contract arbitration to be held in the state of Florida in the United States of America, and to be governed by the laws of the State of Florida, U.S.A.[Doc. 7-2 at 6.]
Despite SCRR's production of the Program Agreement, Plaintiff argues SRCC has failed to demonstrate the existence of a valid agreement to arbitrate. [Doc. 8 at 3-4.] Plaintiff notes that, while he "signed several documents and arranged to pay applicable fees," he "has not maintained a copy of any written agreement with the SRCC." [Id. at 2.] Plaintiff further explains he "does not recall ever signing an agreement that contained language binding the parties to arbitrate any disputes." [Id.] More specifically, Plaintiff argues he "recalls receiving a copy of a fee schedule and policies for testing methodology . . . [and] recalls signing documentation allowing the SRCC to take possession of his property for purposes of testing . . . [but] does not recall signing the [Program] Agreement or ever seeing documentation related to arbitration." [Id. at 2 n.2.] Finally, Plaintiff asserts that the Program Agreement is both unsigned and lacks any specific references to Plaintiff. [Id. at 4.] The Court finds that Plaintiff's arguments are without merit and, for the reasons that follow, that SRCC has met its burden of showing the existence of a written agreement between the parties that contains a valid agreement to arbitrate.
SRCC has submitted the Declaration of Eileen Prado, the Executive Director of SRCC. [Doc. 9-1.] In her Declaration, Prado avers that SRCC administers a number of programs, including the OG-100 Certification Program (the "Program"), through which SRCC certifies the compliance of solar thermal collectors, such as the Rocket Dome, with standards promulgated by the International Code Counsel and SRCC. [Id. at 2-3 ¶¶ 3-4.] Before SRCC will evaluate a product through the Program, an applicant must register for an account with SRCC on the SRCC website. [Id. at 3 ¶ 5.] After registering an account, an applicant must apply for the Program. [Id. at 3 ¶ 6.] The only way for an applicant to apply for the Program, at the time Plaintiff applied, was through the online application process. [Id. at 3 ¶ 7.] The Program Agreement is formed during the application process through transactions on the SRCC website. [Id. at 3 ¶ 8.]
Prado avers that Plaintiff requested an SRCC assessment for his product on February 16, 2014, registering for the Program through the SRCC website, at which time he created a username and password and submitted an online payment to SRCC in the amount of $500. [Id. at 3 ¶¶ 9-10.] On February 26, 2014, Plaintiff logged into his account on the SRCC website and selected the "Collector Package." [Id. at 3 ¶ 12.] Plaintiff progressed through the application process and input the required information regarding his product. [Id. at 4 ¶¶ 13-14.] Plaintiff was then prompted to submit an online payment to SRCC in the amount of $2,750 to participate in the Program's Collector Package. [Id. at 4 ¶ 14.] Before transmitting payment, Plaintiff was required to check a box acknowledging that he read and understood the Program Agreement, with a link to the Program Agreement and the following statement: "I have acknowledge [sic] that I have read and understand the SRCC OG-100 Certification Program Agreement and hereby attest that I am duly authorized to agree to the terms and conditions . . ." [Id. at 4-5 ¶¶ 15-18.] The website would not allow Plaintiff to complete the payment transaction without checking the appropriate box acknowledging and accepting the terms of the Program Agreement. [Id. at 5 ¶ 19.] Plaintiff checked the box, acknowledging and accepting the terms of the Program Agreement, and initiated the payment to enter the Program's Collector Package. [Id. at 5 ¶¶ 20-21.] A link to the Program Agreement was made available to Plaintiff in his online account. [Id. at 5 ¶ 22; Doc. 9-1 at 9.] Thus, in light of the evidence proffered by SRCC, the Court finds that Plaintiff consented to the Program Agreement by providing his electronic signature.
Plaintiff contends that he does not recall signing the Program Agreement [Doc. 8 at 2-4]. The Court finds this argument lacks merit and is insufficient to challenge the validity of the arbitration agreement.
[A] witness who states that he cannot remember whether or not an event alleged to have happened by the moving party actually took place does not help the nonmoving party to meet its burden. The nonmoving party must come up with evidence that negates the version of events alleged by the moving party—an acknowledgment that the event may have occurred, but the witness cannot remember, falls short.Gordon v. TBC Retail Grp., Inc., No. 2:14-cv-03365-DCN, 2016 WL 4247738, at *7 (D.S.C. Aug. 11, 2016) (explaining that a signatory's inability to remember signing an agreement, or other surrounding facts, is insufficient to create a genuine dispute of fact as to the authenticity of the signature) (quoting Cox v. United States, No. 1:13-cv-582-2015 WL 1040577, at *3 (M.D.N.C. Mar. 10, 2015). SCRR has presented evidence that Plaintiff electronically signed the arbitration agreement using a digital signature that only Plaintiff was capable of entering. Plaintiff admits that he signed various documents in his brief, though he does not specifically recall signing the Program Agreement. Finally, and importantly, "an unsworn failure to recall signing the agreement is insufficient to create an issue of fact as to the validity of the arbitration agreement." Hamlin v. Dollar Tree Stores, Inc., No. 2:17-cv-2648-PMD, 2017 WL 6034325, at *1 (D.S.C. Dec. 6, 2017); see also Gadberry v. Rental Servs. Corp., No. 0:09-cv-3327-CMC-PJG, 2011 WL 766991, at *2 (D.S.C. Feb. 24, 2011) (finding no genuine issue of material fact where an employee failed to introduce affirmative evidence that he did not sign the contract containing an arbitration agreement).
As noted above, SCRR employed a "click-through" process for its Program Agreement, which required Plaintiff to affirmatively click an "I Agree" box before entering the Program, a process which has been termed a "clickwrap" agreement by courts. See Kraft Real Estate Investments, LLC v. HomeAway.com, Inc., No. 4:08-cv-3788, 2012 WL 220271, at *7 (D.S.C. Jan. 24, 2012) (collecting cases). "Most courts have concluded that clickwrap agreements are valid, enforceable contracts" and have concluded that "by affirmatively clicking an 'I Agree' box, a party demonstrates acceptance of these contracts in accordance with the posted terms." Id. (citing Koresko v. RealNetworks, Inc., 291 F. Supp. 2d 1157, 1162 (E.D. Cal. 2003) (finding that clicking an "I agree" box on web site evinced express agreement to terms); i.Lan Systems, Inc. v. Netscout Serv. Level Corp., 183 F. Supp. 2d 328, 338 (D. Mass. 2002) (holding that clicking "I agree" box is an appropriate way to form enforceable contract)). Plaintiff's electronic signature acknowledging and accepting the terms of the Program Agreement, by clicking the "I agree" box, constitutes a valid and binding agreement.
In sum, SRCC has submitted a copy of the Program Agreement, in which the parties agreed that " all disputes arising from, or related to, this Agreement shall be resolved through binding contract arbitration ." [Doc. 7-2 at 6 ¶ 16 (emphasis added).] While Plaintiff contends he does not recall signing the Program Agreement [Doc. 8 at 2], SRCC has produced sufficient evidence in the form of an affidavit and screen shots from Plaintiff's online account [Doc. 9-1] to demonstrate that Plaintiff electronically signed the Program Agreement, which contained an arbitration provision. Accordingly, the undersigned finds that SRCC has met its burden of showing that a written agreement exists, electronically signed by Plaintiff on February 26, 2014, that includes an arbitration provision.
Further, the dispute between the parties falls within the scope of the arbitration agreement. In his Complaint, Plaintiff asserts claims for breach of contract and product disparagement, both arising from SRCC's contractual obligations to test the Rocket Dome using appropriate standards. [Doc. 1-1 at 8-10 ¶¶ 29-46.] As noted above, the Program Agreement provides that all legal disputes arising from the Program must be resolved through binding arbitration. [Doc. 7-2 at 6 ¶ 16.] Accordingly, the claims asserted by Plaintiff are clearly within the scope of the Program Agreement, and Plaintiff has made no arguments to the contrary.
Having found that SRCC has satisfied all four elements of the applicable test to compel arbitration, the Court will now address Plaintiff's arguments that the arbitration agreement is nevertheless unenforceable.
Enforceability of the Agreement
Plaintiff contends that the Program Agreement is unenforceable because it is unconscionable. [Doc. 8 at 4-6.] Because Plaintiff challenges the validity of the Program Agreement, the Court must determine if the arbitration clause is enforceable against the parties. See 9 U.S.C. § 4. To determine whether an agreement to arbitrate between the parties is valid, the Court must look to state contract law. The Supreme Court of South Carolina has held, "[t]he cardinal rule of contract interpretation is to ascertain and give legal effect to the parties' intentions as determined by the contract language." McGill v. Moore, 672 S.E.2d 571, 574 (S.C. 2009) (citing Schulmeyer v. State Farm Fire and Cas. Co., 579 S.E.2d 132, 134 (S.C. 2003)). "If the language is clear and unambiguous, the language alone determines the contract's force and effect." United Dominion Realty Trust, Inc. v. Wal-Mart Stores, Inc., 413 S.E.2d 866, 868 (S.C. Ct. App. 1992) (citing Connor v. Alvarez, 328 S.E.2d 334 (S.C. 1985)). "When a contract is unambiguous, clear and explicit, it must be construed according to the terms the parties have used, to be taken and understood in their plain, ordinary and popular sense." C.A.N. Enters., Inc. v. S.C. Health and Human Servs. Fin. Comm'n, 373 S.E.2d 584 (S.C. 1988) (citing Warner v. Weader, 311 S.E.2d 78, 79 (S.C. 1983)).
As noted, Plaintiff argues that the Program Agreement is unconscionable. [Doc. 8 at 4-6.] "In South Carolina, unconscionability is defined as the absence of meaningful choice on the part of one party due to one-sided contract provisions, together with terms that are so oppressive that no reasonable person would make them and no fair and honest person would accept them." Simpson v. MSA of Myrtle Beach, Inc., 644 S.E.2d 663, 668 (S.C. 2007). The party challenging the validity of an arbitration agreement bears the burden of showing that the arbitration agreement is unenforceable. Joyner v. GE Healthcare, No. 4:08-cv-2563-TLW-TER, 2009 WL 3063040, at *3 (D.S.C. Sept. 18, 2009) (citing Green Tree Fin. Corp. v. Randolph, 531 U.S. 79, 92 (2000)). "In analyzing claims of unconscionability in the context of arbitration agreements, the Fourth Circuit has instructed courts to focus generally on whether the arbitration clause is geared towards achieving an unbiased decision by a neutral decision-maker." Simpson, 644 S.E.2d at 669 (citing Hooters of Am., Inc. v. Phillips, 173 F.3d 933, 938 (4th Cir. 1999)).
Plaintiff first argues that the Program Agreement is unconscionable because it is a contract of adhesion. [Doc. 8 at 5.] "[A]n adhesion contract is a standard form contract offered on a 'take-it-or-leave-it' basis with terms that are not negotiable." Simpson, 644 S.E.2d at 669 (citing Munoz v. Green Tree Fin. Corp., 542 S.E.2d 360, 365 (S.C. 2001)). "Adhesion contracts, however, are not per se unconscionable." Simpson, 644 S.E.2d at 669; see also Towles v. United HealthCare Corp., 524 S.E.2d 839, 845-46 (S.C. Ct. App. 1999) (upholding arbitration agreement that conditioned employee's continued employment on acceptance of arbitration policy). As the South Carolina Supreme Court has noted, the standardization of contracts is "'a rational and economically efficient response to the rapidity of market transactions and the high costs of negotiations.'" Lackey v. Green Tree Fin. Corp., 498 S.E.2d 898, 902 (S.C. Ct. App. 1998) (quoting Goodwin v. Ford Motor Credit Co., 970 F. Supp. 1007, 1015 (M.D. Ala.1997)). Plaintiff makes no argument as to how the arbitration agreement is unconscionable other than to say it is an adhesion contract, and he fails to present any evidence to support such an argument. Thus, this claim is without merit.
Next, Plaintiff argues that the Program Agreement is unconscionable because the parties are "grossly unequal in their relative bargaining power," asserting that Plaintiff is a small business owner with insignificant experience entering and negotiating contracts, that Plaintiff was not represented by counsel in entering the Program Agreement, and that the parties did not negotiate the contract terms. [Doc. 8 at 5.] Such arguments are insufficient to avoid a binding arbitration agreement. The "mere fact that one party to the contract is larger than the other" cannot be the basis of a finding of unconscionability of an arbitration clause in a contract. Rowe v. AT & T, Inc., No. 6:13-cv-01206-GRA, 2014 WL 172510, at *10 (D.S.C. Jan. 15, 2014) (citing Stedor Enters., Ltd. v. Armtex, Inc., 947 F.2d 727, 733 (4th Cir. 1991)); see also AT & T Mobility, LLC v. Concepcion, 563 U.S. 333, 346-47 (2011) (explaining that "the times in which consumer contracts were anything other than adhesive are long past"). Likewise, "[i]nequality of bargaining power alone will not invalidate an arbitration agreement." Munoz, 542 S.E.2d at 365 n.5 (internal citations omitted). Moreover, a party to a contract has a duty to read the contract and learn its contents before signing it. See id. at 365 ("[A] person who can read is bound to read an agreement before signing it."); Regions Bank v. Schmauch, 582 S.E.2d 432, 440 (S.C. Ct. App. 2003) ("A person signing a document is responsible for reading the document and making sure of its contents. Every contracting party owes a duty to the other party to the contract and to the public to learn the contents of a document before he signs it."); Burwell v. S.C. Nat'l. Bank, 340 S.E.2d 786, 789 (S.C. 1986); Cont'l Jewelry Co. v. Kerhulas, 134 S.E. 505, 507 (S.C. 1926) (emphasizing that a defendant who is "not capable of reading understandingly for himself" has a "duty . . . to read the contract he was requested to sign, or to have it read and explained to him by some other person"). Further, Plaintiff's contention that the Program Agreement is unconscionable because he is a small business owner is unavailing because "setting up a small business requires business acumen and likely legal assistance." Farrow Rd. Dental Grp., P.A. v. AT&T Corp., No. 3:17-cv-01615-CMC, 2017 WL 4216158, at *4 (D.S.C. Sept. 22, 2017) (finding arbitration clause was not unconscionable).
Plaintiff also contends that the Program Agreement fails because he was compelled to seek the services of SRCC and lacked meaningful choice in selecting an entity to certify his product. [Doc. 8 at 5.] As noted by SRCC, Plaintiff was not obligated to use SRCC's services. [Doc. 9 at 7.] Further, Plaintiff's argument addresses the lack of his meaningful choice as to the entire contract, not specifically the arbitration clause. "There are two types of challenges to the validity of arbitration agreements. One challenges specifically the agreement to arbitrate and the other challenges the agreement (contract) as a whole. The former is an issue to be addressed by the courts and the latter is to be addressed by an arbitrator." Smalls v. Advance Am., No. 2:07-cv-3240-TLW-TER, 2008 WL 4177297, at *9 (D.S.C. Sept. 5, 2008) (citing Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 444 (2006)). Here, Plaintiff challenges the validity of the contract as a whole because he asserts he had no meaningful choice in selecting a certification entity. This Court's review, however, is limited to the substantive validity of the agreement to arbitrate.
Finally, Plaintiff argues that the arbitration provision in the Program Agreement is "one-sided," claiming that the language of the arbitration provision indicates that any dispute resolution shall be resolved based on SRCC policy. [Doc. 8 at 5-6.] This contention misstates the plain language of the arbitration clause, which provides that "all disputes arising from, or related to, this Agreement shall be resolved through binding contract arbitration to be held in the state of Florida in the United States of America, and to be governed by the laws of the State of Florida, U.S.A." [Doc. 7-2 at 6 ¶ 16.] Thus, Plaintiff has failed to advance any valid argument that the binding arbitration, to be conducted pursuant to Florida state law according to the Program Agreement, would be one-sided or unconscionable. This court cannot conclude that Plaintiff did not have a meaningful choice when entering the Program Agreement or that the arbitration clause is not "geared towards achieving an unbiased decision by a neutral decision-maker." Wiley v. Advance Am., No. 3:07-cv-3533-TLW-TER, 2008 WL 4179652, at *14 (D.S.C. Sept. 5, 2008) (quoting Simpson, 644 S.E.2d at 669).
Based on the clear and unambiguous language of the Program Agreement, the undersigned finds the Program Agreement is valid and enforceable, and that Plaintiff's claims are expressly covered by its mandatory requirement to arbitrate. Furthermore, SRCC has demonstrated all of the required elements for compelling arbitration. Therefore, it is recommended that the SRCC's motion to compel arbitration be granted. See Adkins, 303 F.3d at 500-01.
Motion to Dismiss
Having concluded that arbitration is proper in this case, the Court must now consider whether to dismiss this action. SRCC asks that the Court dismiss this case with prejudice. [Doc. 7-1 at 9-10.] "When an order to arbitrate has been issued for all claims brought before a court, courts are split on whether the filed action should be dismissed or stayed pending the outcome of the arbitration." Richard A. Bales & Melanie A. Goff, An Analysis of an Order to Compel Arbitration: To Dismiss or Stay?, 115 Penn St. L. Rev. 539, 541 (2011) (collecting cases). The FAA requires a district court, upon motion by any party, to stay judicial proceedings involving issues covered by written arbitration agreements. 9 U.S.C. § 3. However, the FAA is silent as to whether a court may dismiss a case when all issues involved are covered by the applicable arbitration agreement.
As stated, the Fourth Circuit has concluded that, while the FAA requires judges to stay a case involving issues covered by a written arbitration agreement, dismissal without prejudice is the proper remedy when all of the issues presented in a lawsuit are subject to arbitration. See Choice Hotels, 252 F.3d at 709-10 ("Notwithstanding the terms of § 3 [of the FAA], however, dismissal is a proper remedy when all of the issues presented in a lawsuit are arbitrable."); Greenville Hosp. Sys. v. Emp. Welfare Ben. Plan for Emps. of Hazelhurst Mgmt. Co., 628 F. App'x 842, 845-46 (4th Cir. 2015) (affirming dismissal and holding that when "a court determines, after applying this presumption in favor of arbitration, that all of the issues presented are arbitrable, then it may dismiss the case, as the district court did here").
Courts in this District have routinely held that dismissal is the proper remedy when all claims asserted in a case fall within the scope of an arbitration agreement. See, e.g., Cox v. Assisted Living Concepts, Inc., No. 6:13-cv-00747, 2014 WL 1094394, at *8 (D.S.C. Mar. 18, 2014); Fleetwood Transp. Corp. v. Packaging Corp. of Am., No. 6:10-cv-1219-JMC, 2012 WL 761737, at *5 (D.S.C. Mar. 8, 2012); Thomas v. Santander Consumer USA Inc., No. 0:15-cv-04980-CMC-PJG, 2016 WL 5956279, at *4 (D.S.C. Oct. 14, 2016) ("Dismissal is appropriate when, as here, all claims fall within the scope of an enforceable arbitration provision"); Patterson v. Asbury SC Lex, L.L.C., No. 6:16-cv-1666-MGL, 2016 WL 7474377, at *4 (D.S.C. Dec. 29, 2016) (compelling arbitration and dismissing case where the "only issue in Plaintiff's suit is arbitrable"); Carmichael v. Hilton Head Island Dev. Co., LLC, No. 9:16-cv-1641-PMD, 2016 WL 4527194, at *4 (D.S.C. Aug. 30, 2016) ("the proper course of action is to dismiss the case" when all claims are arbitrable); St. Denis v. OneMain Fin., Inc., No. 8:12-cv-01669-TMC, 2012 WL 6061022, at *3 (D.S.C. Dec. 6, 2012) (dismissing action and compelling arbitration where plaintiff's sole claim was subject to arbitration); St. Andrews Townhomes Homeowners' Ass'n, Inc. v. Beazer Homes USA, Inc., No. 4:09-cv-00382-TLW-TER, 2010 WL 985385, at *2 (D.S.C. Mar. 12, 2010); Willard v. Dollar Gen. Corp., No. 3:17-cv-00675-JMC, 2017 WL 4551500, at *4 (D.S.C. Oct. 12, 2017). Based on the foregoing, and because the Court finds that all of the claims in this dispute are subject to arbitration, it is recommended that the Complaint be dismissed.
RECOMMENDATION
Accordingly, for the reasons explained above, it is recommended that SRCC's motion to compel arbitration [Doc. 7] be GRANTED and that the case be DISMISSED.
IT IS SO RECOMMENDED.
s/ Jacquelyn D. Austin
United States Magistrate Judge July 23, 2018
Greenville, South Carolina