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Nonotuck Resource Associates, Inc. v. Foothold Technology, Inc.

United States District Court, D. Massachusetts

November 5, 2017

NONOTUCK RESOURCE ASSOCIATES, INC. Plaintiff,
v.
FOOTHOLD TECHNOLOGY, INC., Defendant.

          REPORT AND RECOMMENDATION ON PLAINTIFF'S MOTION TO REMAND TO STATE COURT; DEFENDANT'S MOTION TO DISMISS AND COMPEL ARBITRATION; AND PLAINTIFF'S MOTION TO STAY ARBITRATION (Dkt. Nos. 7, 8, 19)

          KATHERINE A. ROBERTSON United States Magistrate Judge

         I. Introduction

         Plaintiff Nonotuck Resource Associates, Inc. (“Plaintiff” or “Nonotuck”) entered into a contract with defendant Foothold Technology, Inc. (“Defendant” or “Foothold”) effective May 1, 2016 requiring Defendant to install, and service a software program to track and store Plaintiff's data and generate related reports (Dkt. No. 26 at 2, ¶¶ 6-7). The complaint alleges that Defendant misrepresented its software's capabilities and its ability to complete the project on time (id. at 2-3, ¶ 8). Plaintiff filed its complaint, which includes claims under the Massachusetts Unfair Trade Practices Act, Mass. Gen. Laws ch. 93A, §11 (“Chapter 93A”) (Count I); breach of contract (Count II); breach of oral express warranties (Count III); breach of implied warranty of merchantability (“Count IV); breach of implied warranty of fitness for particular purpose (Count V); and a Motion to Stay Arbitration Proceedings, in the Superior Court Department of the Massachusetts Trial Court, Hampshire County, on June 8, 2017, and served Defendant in hand on June 26, 2017 (Dkt. No. 1 at 2, ¶ 6; Dkt. No. 5 at 2, 6-10). Defendant timely filed its notice of removal, invoking this court's diversity jurisdiction, on July 24, 2017 (Dkt. No. 1 at 2, ¶ 6).

         In this court, Plaintiff has filed a Motion to Remand to State Court (Dkt. No. 7) and a Motion to Stay Arbitration (Dkt. No. 19). Defendant has filed a Motion to Dismiss and Compel Arbitration (Dkt. No. 8). These three motions were referred to me for Report and Recommendation (Dkt. Nos. 18, 20). See 28 U.S.C. 636 § (a), (b)(1)(A). For the reasons set forth below, I recommend that: (A) Plaintiff's Motion to Remand to State Court be denied; (B) Defendant's Motion to Dismiss and Compel Arbitration be granted; and (C) Plaintiff's Motion to Stay Arbitration be denied.

         II. Relevant background

         The parties entered into a Foothold Technology, Inc. Subscriber Agreement (“Agreement”) with an effective date of May 1, 2016 (Dkt. No. 5 at 12). The Agreement, which is attached as Exhibit 1 to the complaint, set forth the term and the services to be provided. An addendum to the Agreement, incorporated therein by reference, stated that Foothold would install an initial configuration of its AWARDS system within 4 months of the effective date of the agreement, train Nonotuck employees on use of the system, and provide up to ten hours per week of email troubleshooting support services at no additional costs as long as the service agreement remained in effect (id. at 17). Custom development would be available subject to Foothold's availability at Foothold's customary rates (id.).

         Section 15 of the Agreement, captioned “miscellaneous, ” provided, in pertinent part, as follows:

Any dispute arising hereunder shall be exclusively settled by confidential and binding arbitration under the then current Arbitration Rules of the American Arbitration Association (the “AAA”); provided, however, that nothing in this Agreement shall prohibit (i) either party from seeking injunctive or other equitable relief in any court of competent jurisdiction in the event of a breach by the other party or any of its Agents of the provisions of Section 7 (Confidentiality) or to prevent any other unauthorized copying, disclosure, use, retention or distribution of its Confidential Information or intellectual or other property or (ii) Supplier from bringing a Collection Action in any court of competent jurisdiction.

(Id. at 14).

         On or around March 21, 2017, Plaintiff sent a Chapter 93A demand letter to Defendant, stating that Plaintiff was ceasing payments to Defendant under the Agreement on the basis of alleged breaches of the Agreement by Defendant (id. at 18-21). On May 2, 2017, Defendant responded to the letter by proposing that the parties terminate the Agreement effective April 30, 2017 and exchange mutual releases of all claims concerning the Agreement (id. at 26). On May 31, 2017, Foothold commenced an arbitration proceeding based on Nonotuck's failure to make payments due to Foothold under the Agreement (id. at 27). On June 8, 2017, following Foothold's commencement of the arbitration proceeding, Nonotuck filed this action in Hampshire Superior Court (id. at 2-3). The complaint alleges that Plaintiff is a Massachusetts non-profit agency operating throughout Massachusetts with its principal place of business in Northampton, with the Defendant being a corporation with its principal place of business in New York (id. at 5). Plaintiff claims to have been damaged in the amount of $200, 000 and to be entitled to treble damages under Chapter 93A (id. at 9-10). Despite its state court filing, Nonotuck appeared and has participated in the arbitration proceeding, in which an arbitrator has been selected (Dkt. No. 9 at 2). At the hearing on the pending motions, the parties informed the court that the arbitrator was waiting for rulings from this court on the pending motions before moving forward with the arbitration proceeding.

         III. Discussion

         A. Plaintiff's Motion to Remand to State Court

          Pursuant to 28 U.S.C. § 1332, this court has original jurisdiction of any action that is between citizens of different States when the amount in controversy exceeds the sum of $75, 000. This action is between citizens of different states - New York and Massachusetts - and the amount in controversy exceeds $75, 000 (Dkt. No. 5 at 5, 8-9). Section 1441 of Title 28 of the United States Code provides that a defendant (here, Foothold) may remove an action over which this court would have original jurisdiction as long as removal is made “in accordance with section 1446 of . . . title [28].” 28 U.S.C. § 1441(e). Plaintiff does not dispute that this case meets the requirements for diversity jurisdiction, nor does it assert that Defendant failed to remove this case in accordance with the provisions of section 1446. It is black letter law that when a defendant has properly removed a case based on diversity jurisdiction, a “District Court [cannot] properly . . . eliminate[] the case from its docket, whether by a remand or by a dismissal.” Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343, 356 (1988) (citing Thermitron Prods., Inc. v. Hermansdorfer, 423 U.S. 336, 344 (1976)). “[D]iversity jurisdiction . . . is not discretionary.” Id. Plaintiff's contention that the state court has jurisdiction over this case is irrelevant as long as the case was properly removed to this court. It was. “[W]hen, [as here, ] a federal court has jurisdiction, it also has a ‘virtually unflagging obligation . . . to exercise' that authority.” Mata v. Lynch, 135 S.Ct. 2150, 2156 (2015) (quoting Colorado River Water Conservation Dist. v. U.S., 424 U.S. 800, 817 (1976)). Because this case was properly removed to this court and this court has a non-discretionary obligation to provide a forum for the parties' dispute, I recommend that Plaintiff's Motion to Remand to State Court be denied.

         B. Defendant's Motion to Dismiss and ...


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