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LLC v. T2B, LLC

United States District Court, D. Massachusetts

February 13, 2019

Charlie's Project, LLC, et al., Plaintiffs,
v.
T2B, LLC, et al., Defendants.

          ORDER & MEMORANDUM

          INDIRA TALWANI, UNITED STATES DISTRICT JUDGE.

         Before the court is Defendants' Motion to Dismiss and Compel Arbitration [#7]. For the following reasons, the motion is DENIED IN PART and ALLOWED IN PART.

         I. Background

         In December 2016, Plaintiff Anna Hernandez, as owner of Charlie's Project, and Defendant T2B, LLC (“T2B”) executed two agreements, the Distribution Agreement [#9-1] and the Services and Logistics Agreement [#9-2]. The Distribution Agreement detailed T2B's agreement to serve as the “exclusive wholesale distributor” of Charlie's Project's products. Dist. Agreement [# 9-1] at 3.[1] The Services and Logistics Agreement outlined T2B's agreement to store and ship Charlie's Project's products. Serv. and Logistics Agreement [#9-2] at 2. These agreements (collectively the “2016 Agreements”) contain no clauses requiring arbitration of disputes. On January 17, 2017, Charlie's Project became a Limited Liability Company, Plaintiff Charlie's Project, LLC (“CP”), and on January 18, 2017, Plaintiff Hernandez purchased an ownership interest in Defendant T2B and executed an LLC Agreement (the “2017 Agreement”) [#9-3] with T2B, Defendant Brandon McDaniel (T2B's founder), and two others. The 2017 Agreement contains the following provision:

14.23 Arbitration. Unless injunctive action is sought, all claims, demands, disputes, controversies and differences that may arise between or among any of the Disputing Parties concerning any issue relating to the interpretation or enforcement of this Agreement or relating to the rights or liabilities of any of the Disputing Parties under this Agreement, any management agreement, or cross indemnification agreement, shall be exclusively determined and settled by arbitration.
…(e) except where in conflict with the terms of this paragraph 14.23, the AAA Rules shall govern the Arbitration proceedings…

2017 Agreement [#9-3] at 33-34.

         In October 2017, Plaintiffs commenced this action in Superior Court against T2B, Brendon McDaniel, and his spouse Nicole McDaniel. Complaint, State Court Record [#1-1]. Plaintiffs alleged that T2B manufactured an inferior product, altered CP's branding without permission, deprived CP of rights to exclusive product designs in violation of the Distribution Agreement, sold directly to end users in violation of the Distribution Agreement's wholesale requirements, failed to meet shipping obligations in violation of the Distribution Agreement, charged CP fees in violation of the Distribution Agreement, failed to follow the Services and Logistics Agreement's shipping payment schedule, terminated the Services and Logistics Agreement in violation of the agreement's terms, overcharged for shipping under the Services and Logistics Agreement, refused to provide Plaintiffs access to T2B's financial records in violation of the Distribution Agreement, refused to return inventory in violation of the Services and Logistics Agreement, and retained copies of CP's customer list in violation of the 2016 Agreements. Id. at 2-14. The suit alleged breach of contract and breach of the implied covenant of good faith and fair dealing (based on alleged breaches of the 2016 Agreements), unfair trade practices, misappropriation, and defamation. Id. at 10-12.

         Defendants moved to dismiss and compel arbitration, citing the 2017 Agreement's arbitration clause. State Court Record [#1-1] at 44. The Superior Court (Salinger, J.) denied the motion, finding none of Plaintiffs' claims implicated the 2017 Agreement. Superior Court Mem. and Order [#15-1] at 2.

         In May 2018, Plaintiffs amended their complaint, adding additional claims arising from the 2016 Agreements and claims for trademark infringement. State Court Record [#1-1] at 74-107. Defendants removed to this court based on the federal trademark claims and again moved to dismiss and to compel arbitration.[2] Notice of Removal [#1]; Def.'s Mot. to Dismiss and Compel Arbitration [#7].

         II. Discussion

         A. Law of the Case

         Plaintiffs contend that the law of the case doctrine bars reconsideration of the Superior Court's decision denying Defendants' first motion to dismiss and to compel arbitration. Pl.'s Mem. [#15] at 9. “Under the law of the case doctrine, when a court decides upon a rule of law that decision should continue to govern the same issues in subsequent stages in the same case.” Negron-Almeda v. Santiago, 579 F.3d 45, 50 (1st Cir. 2009) (internal quotation marks and citation omitted). “[L]aw-of-the-case rules afford courts the security of consistency within a single case while at the same time avoiding the wastefulness, delay, and overall wheel-spinning that attend piecemeal consideration of matters which might have been previously adjudicated.” United States v. Connell, 6 F.3d 27, 30 (1st Cir. 1993). However, “law of the case permits a lower court to review prior interlocutory orders as long as that review is not an abuse of discretion.” Harlow v. Children's Hosp., 432 F.3d 50, 55 (1st Cir. 2005) (affirming district court's dismissal of case after reconsideration of state court's ruling that defendant's contacts with forum satisfied requirements of personal jurisdiction).

         The court finds further review appropriate. Although its reasoning was sound, the Superior Court relied in part on cases which the United States Supreme Court has since abrogated in Henry Schein, Inc. ...


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