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National Dentex, LLC v. Gold

United States District Court, D. Massachusetts

December 12, 2018

NATIONAL DENTEX, LLC, Plaintiff,
v.
PHILLIP N. GOLD, Defendant.

          ORDER ON RENEWED MOTION TO COMPEL ARBITRATION (DOC. NO. 15)

          LEO T. SOROKIN UNITED STATES DISTRICT JUDGE

         National Dentex, LLC, has sued Phillip N. Gold for allegedly breaching two contracts the parties entered in 2000, when National Dentex acquired Gold's business. Gold asserts that the claims against him are within the scope of an arbitration provision contained in a third contract, also executed in 2000 as part of the same business transaction. He seeks an order dismissing this action or staying it pending arbitration. National Dentex opposes. Because the claims National Dentex has elected to pursue arise under related, but separate, agreements, neither of which contain or incorporate an arbitration clause, Gold's motion to compel arbitration is DENIED.

         I. BACKGROUND[1]

         National Dentex “offers a number of products and services designed to assist dentists” in caring for their patients. Doc. No. 12 ¶ 1. Until October of 2000, Gold was the Chief Executive Officer of Oral Arts, a competitor of National Dentex based in Georgia. Id. ¶ 2. Gold sold Oral Arts to National Dentex in a transaction which included a stock purchase agreement (“SPA”), an employment agreement (“EA”), and a non-competition agreement (“NCA”), all of which were signed by the parties on October 23, 2000. Id. ¶¶ 3-5; Doc. Nos. 12-1, 12-2, 16-1. Blank copies of the EA, the NCA, and the lease were attached as exhibits to the SPA, as executing those agreements were conditions precedent to consummating the SPA. Doc. No. 16-1 at 17-20.[2]

         The SPA stated that it was to be construed pursuant to Massachusetts law and reflected the parties' consent to the jurisdiction of Massachusetts state and federal courts. Id. at 26. It contained the following merger clause:

Entire Agreement. This Agreement, together with the Schedules and Exhibits, sets forth the entire agreement and understanding among the parties as to the subject matter hereof and merges and supersedes all prior discussions, agreements and understandings with respect hereto. This Agreement and said Schedules and Exhibits may not be amended, changed or modified except by a written instrument duly executed by the parties hereto.

Id. The SPA also contained an arbitration clause that provided, in relevant part:

Arbitration. Except as otherwise provided in Section 2(e) hereof, [3] or as otherwise agreed by the parties, any controversy, dispute or claim between the parties arising out of, related to or in connection with this Agreement or the performance or breach hereof shall be submitted to and settled by arbitration conducted by the American Arbitration Association in Boston, Massachusetts, in accordance with its commercial arbitration rules as then in effect . . . .

Id. at 27.

         The EA and the NCA each: state that they are to be “governed by and construed in accordance with the internal laws of the Commonwealth of Massachusetts, ” Doc. No. 12-1 ¶ 12; Doc. No. 12-2 ¶ 5; and reflect the parties' consent to the jurisdiction of Massachusetts state and federal courts, Doc. No. 12-1 ¶ 13; Doc. No. 12-2 ¶ 6. In addition, the EA and the NCA each contain a merger clause. See Doc. No. 12-1 ¶ 11 (“This [Employment] Agreement, which contains the entire contractual understanding between the parties, may not be changed orally but only by a written instrument signed by the parties hereto.”); Doc. No. 12-1 ¶ 5 (“This [NonCompetition] Agreement may be amended only by an instrument in writing executed by the parties hereto and this Agreement constitutes the entire agreement among the parties hereto as to the subject matter hereof.”).

         Neither the EA nor the NCA contains an arbitration clause, nor any language explicitly incorporating the SPA and/or its arbitration clause.

         Upon completion of the October 2000 sale, Gold became the President of Oral Arts (then owned by National Dentex), a position he held until he resigned at the end of February 2017. Doc. No. 12 ¶¶ 2, 12. According to National Dentex, by September 2017 Gold was acting as a consultant to a competing business, lending that business his name, soliciting former Oral Arts customers on behalf of the new business, and persuading Oral Arts employees to take positions with the new business. Id. ¶¶ 12-13. As a result, “National Dentex was forced to close Oral Arts on September 29, 2017.” Id. ¶ 14.

         National Dentex alleges that Gold's post-resignation conduct violated his obligations under the EA and the NCA. Id. In the this action, National Dentex seeks a declaratory judgment and monetary damages for the alleged breaches of the EA, the NCA, and the covenant of good faith and fair dealing implicit in both, [4] as well as an equitable extension of the “restrictive covenant obligations” contained in the EA and the NCA “for the duration that [Gold] was in breach of such obligations.” Id. at 19-24.

         Gold responded to the First Amended Complaint by moving to compel arbitration, citing the arbitration clause in the SPA which, Gold argues, reaches all disputes among the parties arising from any of the agreements executed on October 23, 2000. Doc. Nos. 16, 17. National Dentex opposed the motion, urging that its claims are limited to breaches of the EA and the NCA, which ...


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