Court Opinion

ID: 2766800
Source: CourtListenerOpinion
Date Created: 2015-01-06 14:05:17.882305+00
Date Added: 2024-06-11T11:26:21.877186
License: Public Domain

An unpublished opinion of the North Carolina Court of Appeals does not constitute
controlling legal authority. Citation is disfavored, but may be permitted in accordance
with the provisions of Rule 30(e)(3) of the North Carolina Rules of Appellate Procedure.

                                NO. COA14-580
                       NORTH CAROLINA COURT OF APPEALS

                              Filed: 6 January 2015

PATTISON OUTDOOR ADVERTISING, LP,
     Plaintiff,

      v.                                      Mecklenburg County
                                              No. 13 CVS 17582
THE ELEVATOR CHANNEL, INC., d/b/a
11GIRAFFES COMPANY,
     Defendant.

      Appeal by Defendant from order entered 9 January 2014 by

Judge Richard D. Boner in Mecklenburg County Superior Court.

Heard in the Court of Appeals 20 October 2014.

      K&L Gates LLP, by John H. Culver III, for Plaintiff.

      James, McElroy & Diehl, P.A., by Preston O. Odom, III, and
      Adam L. Ross, for Defendant.

      STEPHENS, Judge.

                    Factual and Procedural Background

      Defendant     The    Elevator     Channel,     Inc.,    d/b/a    11Giraffes

Company, is a Delaware corporation based in North Carolina that

provides media software platforms.                 In April 2010, Defendant

agreed to build and manage a network of digital advertising and
                                         -2-
other content for Plaintiff Pattison Outdoor Advertising, LP, a

Canadian    advertising      company.           Pursuant       to   the    services

agreement between the parties (“the Agreement”), Plaintiff would

provide    all   content    for    the    network,     while    Defendant    would

install    and   manage    the    network      and   provide    customer   service

support.    Section 18 of the Agreement provides the process to be

followed in resolving disputes between the parties (“the ADR

provision”):

            Any dispute, controversy or claim arising
            out of or in connection with this Agreement
            or   the    failure    of  [Defendant]   and
            [Plaintiff]   to    agree on   any   matters
            requiring or contemplating their agreement
            hereunder (a “Dispute”) shall be dealt with
            as follows:

            (a) A meeting shall be held between Parties
            promptly after a Dispute has arisen.        The
            meeting will be attended by representatives
            of    the   Parties     with    decision-making
            authority to settle the Dispute.         At the
            meeting, the Parties will attempt in good
            faith to negotiate a resolution of the
            Dispute.    All negotiations and settlement
            discussions to resolve a Dispute shall he
            treated   as    compromise     and   settlement
            negotiations between the Parties and shall
            be   not   subject   to    disclosure   through
            discovery or any other process and shall not
            be   admissible    into    evidence    in   any
            proceeding.

            (b)    If, within ten (10) days after a
            Dispute   has   arisen   (the   “Negotiation
            Period”), the Parties have not succeeded in
            negotiating a resolution of the Dispute, the
                                   -3-
            parties agree to use the services of a
            mediator(s) to attempt to resolve their
            differences and failing agreement on the
            procedures to be followed, it shall be
            conducted in accordance with the Rules of
            Procedure for the Conduct of Mediation of
            the ADR Institute of Ontario. In the event
            that the mediation does not result in a
            settlement of the Dispute, any unresolved
            issues shall then be settled by arbitrator
            in accordance with the Arbitrations Act,
            1991   of    Ontario   and,    except  where
            inconsistent with this part, the Rules of
            Procedure of the Arbitration and Mediation
            Institute of Ontario Inc.     If the Parties
            are unable to agree to an arbitrator, then
            either Party shall be entitled to apply to a
            judge of Ontario Court of Justice, General
            Division to appoint an arbitrator and the
            arbitrator so appointed shall proceed to
            determine the matter mutatis mutandis in
            accordance with the provisions hereof.

            (c) Any award or decision made by an
            arbitrator appointed hereunder is final and
            binding upon the Parties and may be enforced
            in the same manner as a judgment or order to
            the same effect pursuant to Section 13 of
            the Arbitrations Act, 1991 and no appeal
            shall lie there[]from except to the extent
            permitted by the Arbitrations Act, 1991.

    On 8 September 2010, the parties executed an amendment to

the Agreement (“Amendment 1”).           Under Amendment 1, Defendant

agreed to deliver various intellectual property and software to

Plaintiff   in   exchange   for   an   advance   payment   of   $154,500.

Plaintiff made the advance payment of $154,500.             The parties

agree that the ADR provision of the Agreement was unaffected by
                                              -4-
Amendment 1.        However, on 13 December 2010, the parties executed

a memorandum of understanding (“the Memo”) which provided that

the Agreement would be terminated on 31 March 2011, at which

point     “both        parties     will       be     released      of       any     and     all

responsibilities/obligations (financial, operational, or other),

with    the     sole     exception      of     the      $154,500      advancement         under

Amendment . . . 1 . . . .”                Specifically, the Memo provided that

Defendant would reimburse the advance payment of $154,500 to

Plaintiff      by   31    March    2012,      at     which     point    Plaintiff         would

return    to     Defendant       the    intellectual           property       and    software

discussed in Amendment 1.               In effect, the Memo served to “undo”

Amendment 1.

       On 11 July and 13 September 2013, Plaintiff sent demand

letters    to     Defendant,       seeking         reimbursement       of     the    $154,500

advance    payment.         In     late      August     and    early    September         2013,

Defendant       attempted     to       set    up    a   time    for     the       parties    to

conference via telephone in an effort to settle the dispute.

Plaintiff elected not to pursue a telephone conference.

       On 1 October 2013, Plaintiff filed a complaint alleging

claims for breach of contract, unjust enrichment, and statement

of account against Defendant.                      On 2 December 2013, Defendant

moved     to     dismiss     Plaintiff’s            complaint      without          prejudice
                                    -5-
pursuant to Rules of Civil Procedure 12(b)(1) and 12(b)(6) until

“Plaintiff   ha[d]   participated     in   good   faith    in   the    dispute

resolution procedures which are mandatory conditions precedent

to its right to bring” its claims against Defendant.               Following

a hearing, the trial court entered an order on 9 January 2014

denying   Defendant’s   motion   to       dismiss.    From      that   order,

Defendant appeals.

                     Grounds for Appellate Review

    As    Defendant     notes,   this       appeal    is     interlocutory.

Defendant cites Howard v. Oakwood Homes Corp., 134 N.C. App.
116, 516 S.E.2d 879, disc. review denied, 350 N.C. 832, 539
S.E.2d 288 (1999), cert. denied, 528 U.S. 1155, 145 L. Ed. 2d
1072 (2000),   in support of the proposition that this appeal

nevertheless is properly before this Court.          That case held:

          Where a trial court’s order, such as the
          order sub judice, fails to resolve all
          issues between all parties in an action, the
          order is not a final judgment, but rather is
          interlocutory. While an interlocutory order
          is generally not directly appealable, such
          an order will be considered if the trial
          court’s decision deprives the appellant of a
          substantial right which would be lost absent
          immediate review.   The right to arbitrate a
          claim is a substantial right which may be
          lost if review is delayed, and an order
          denying arbitration is therefore immediately
          appealable.
                                                 -6-
Id. at 118, 516 S.E.2d at 881 (citations and internal quotation

marks omitted).       We first observe that Defendant did not move to

compel Plaintiff to engage in                      any of the dispute resolution

procedures described in the ADR provision of the Agreement.1

      However,      in     its        order       denying      Defendant’s            motion    to

dismiss,    the     trial        court        “conclude[d]           that       there    is    no

enforceable      agreement        between         the      [p]arties      with    respect       to

alternative dispute resolution.”                       In denying a motion to dismiss

pursuant    to     Rule    12(b),       a     trial        court    need    not       enter    any

findings of fact or, for that matter, explain the reasons for

its   ruling.        The    record          on     appeal      does       not    include       the

transcript of the hearing on Defendant’s motion, and thus we are

unable to ascertain whether Defendant orally moved to compel

Plaintiff   to     engage        in    the       procedures         outlined      in    the    ADR

provision   or     explicitly          sought          a   ruling    on    whether      the    ADR

provision was enforceable.

      Defendant      did,    however,             raise       the    issue       of     the    ADR

provision     in    its     motion          to     dismiss,         contending         that    the

provision bars Plaintiff from proceeding on its complaint until

1
  Indeed, Defendant has been careful both in the trial court and
on appeal to specify that it seeks only dismissal of Plaintiff’s
case and not any order that would compel the parties to actually
resolve their dispute or even for a stay pending compliance with
the ADR provision.
                                -7-
the ADR procedures have been followed.          Further, in its grounds

for appellate review and in its first argument to this Court,

Defendant treats the trial court’s ruling as, in effect, the

denial of a motion to compel arbitration or to stay proceedings

pending     arbitration.   Crucially,     the    trial   court’s   ruling

effectively forecloses Defendant’s right to compel Plaintiff’s

participation in the procedures described in the ADR provision,

“a substantial right which may be lost if review is delayed.”

See id.     In light of these circumstances, we conclude that the

order is immediately appealable, and we review it as a denial of

a motion to compel the parties’ engagement as directed in the

ADR provision or to stay proceedings until those procedures are

followed.

                             Discussion

     Defendant argues that the trial court erred (1) by failing

to make sufficient findings of fact to support its order and (2)

in denying Defendant’s motion to dismiss.        We affirm.

I.   Sufficiency of the findings of fact

     Defendant first contends that the trial court’s order lacks

sufficient findings of fact.   We disagree.

     When

            a   party   files   a   motion  to   compel
            arbitration, the trial court must perform a
                                          -8-
              two-step analysis requiring the trial court
              to ascertain both (1) whether the parties
              had a valid agreement to arbitrate, and also
              (2) whether the specific dispute falls
              within   the   substantive    scope   of   that
              agreement.       This   Court    has   stressed
              repeatedly     that,     in     making     this
              determination, the trial court must state
              the basis for its decision in denying a
              defendant’s   motion   to   stay    proceedings
              [pending arbitration] in order for this
              Court to properly review whether or not the
              trial court correctly denied the defendant’s
              motion.

U.S. Trust Co., N.A. v. Stanford Grp. Co., 199 N.C. App. 287,

290,    681 S.E.2d 512,   514      (2009)       (citations    and   internal

quotation      marks    omitted).         In    that    case,   we   remanded   for

additional findings of fact because “the order d[id] not set out

the    rationale   underlying       the   trial    court’s      decision   to   deny

[the] defendants’ motion.            Nothing in the order explains what

about the facts presented persuaded the trial court that [the]

plaintiff should not be compelled to arbitrate its dispute.”

Id. at 291, 681 S.E.2d at 515 (internal quotation marks and

ellipsis omitted).        This Court noted that the parties had argued

numerous possible bases in fact and in law that could support

the trial court’s denial.           Id.; see also Ellis-Don Const., Inc.

v. HNTB Corp., 169 N.C. App. 630, 635, 610 S.E.2d 293, 296

(2005) (“While denial of [the] defendant’s motion might have

resulted from:         (1) a lack of privity between the parties; (2) a
                                         -9-
lack   of   a   binding        arbitration     agreement;      (3)   this     specific

dispute     does   not    fall     within    the    scope     of   any   arbitration

agreement; or, (4) any other reason, we are unable to determine

the basis for the trial court’s judgment.”); Barnhouse v. Am.

Express Fin. Advisors, Inc., 151 N.C. App. 507, 509, 566 S.E.2d
130, 132 (2002) (noting that “there is no indication that the

trial court made any determination regarding the existence of an

arbitration agreement between the parties before denying [the]

defendants’ motion to stay proceedings[,]” and that, although

the order could support an inference that the trial court found

no arbitration agreement existed, “other possibilities [were]

equally     likely”      for     the   denial      of   the    motion    to     compel

arbitration, such as equitable estoppel and procedural grounds).

       However, in Barnhouse, we emphasized that a trial court is

not required “to make detailed and specific findings of fact

regarding the agreement to arbitrate.                   Rather, the order must

simply reflect whether or not a valid agreement to arbitrate

exists between the parties.”            Id. at 509 n.1, 566 S.E.2d at 132

n.1.

       Here, the trial court explicitly “set out the rationale

underlying the trial court’s decision to deny [D]efendant[’s]

motion[,]” see U.S. Trust Co., N.A., 199 N.C. App. at 291, 681
                                              -10-
S.E.2d      at    515,    to    wit,    “there       is    no        enforceable    agreement

between      the     [p]arties        with     respect          to    alternative    dispute

resolution.”         This determination is all that is required under

our case law, including the cases cited by Defendant on appeal.

See id.; Barnhouse, 151 N.C. App. at 509 n.1, 566 S.E.2d at 132

n.1; Griessel v. Temas Eye Ctr., P.C., 199 N.C. App. 314, 317,

681 S.E.2d 446, 448 (2009); Steffes v. DeLapp, 177 N.C. App.
802,     805,      629 S.E.2d 892,     895       (2006);        Pineville    Forest

Homeowners Ass’n v. Portrait Homes Const. Co., 175 N.C. App.
380, 387, 623 S.E.2d 620, 625 (2006); CIT Grp./Sales Fin., Inc.

v. Bray, 141 N.C. App. 542, 545, 539 S.E.2d 690, 692 (2000).                                We

overrule this argument.

II.    Denial of motion to dismiss

       Defendant         also   contends       that       the    trial     court    erred   in

denying     its     motion      to    dismiss    because             Plaintiff   “failed    to

allege      satisfaction         of    an     enforceable             alternative    dispute

resolution provision.”               Defendant misperceives its burden in the

trial court as well as our appellate standard of review.

       As   noted     supra,     Defendant       moved          to    dismiss    pursuant   to

Rules 12(b)(1) and 12(b)(6).

                 A motion to dismiss made pursuant to . . .
                 Rule 12(b)(6) tests the legal sufficiency of
                 the complaint. In order to withstand such a
                 motion,    the   complaint    must   provide
                                -11-
          sufficient   notice    of    the    events    and
          circumstances from which the claim arises,
          and must state allegations sufficient to
          satisfy the substantive elements of at least
          some recognized claim. The question for the
          court is whether, as a matter of law, the
          allegations of the complaint, treated as
          true, are sufficient to state a claim upon
          which relief may be granted under some legal
          theory, whether properly labeled or not.        A
          complaint   should  not    be    dismissed    for
          insufficiency   unless    it   appears     to   a
          certainty that [the] plaintiff is entitled
          to no relief under any state of facts which
          could be proved in support of the claim.
          Such a lack of merit may consist of the
          disclosure of facts which will necessarily
          defeat the claim as well as where there is
          an absence of law or fact necessary to
          support a claim.

Harris v. NCNB Nat’l Bank, 85 N.C. App. 669, 670-71, 355 S.E.2d
838,   840-41   (1987)   (citations,   internal   quotation   marks,

emphasis omitted).

          A motion under Rule 12(b)(1) may be used to
          attack two different types of defects.     The
          first is the pleader’s failure to comply
          with Rule 8(a)(1), which means that the
          allegations      in     the    complaint   are
          insufficient to show that the court has
          jurisdiction over the subject matter of the
          case.     The other defect that may be
          challenged    under   Rule   12(b)(1)   is the
          court’s actual lack of jurisdiction over the
          subject matter, a defect that may exist
          despite   the    formal   sufficiency   of the
          allegations in the complaint.

          [Thus,   a]s  this   Court  has  previously
          explained, when considering a Rule 12(b)(1)
          motion — in contrast to a motion under Rule
                                       -12-
              12(b)(6) — a trial court is not confined to
              the face of the pleadings, but may review or
              accept any evidence, such as affidavits, or
              it may hold an evidentiary hearing.

Harper v. City of Asheville, 160 N.C. App. 209, 215, 585 S.E.2d
240,    244     (2003)   (citations,     internal   quotation   marks,   and

ellipses omitted).

       We review de novo a trial court’s denial of a Rule 12(b)(6)

motion to dismiss.        Leary v. N.C. Forest Prods., Inc., 157 N.C.

App. 396, 400, 580 S.E.2d 1, 4, affirmed per curiam, 357 N.C.
567, 597 S.E.2d 673 (2003).        Likewise, we review a ruling under

Rule 12(b)(1) de novo and “view the allegations as true and the

supporting record in the light most favorable to the non-moving

party.”       Mangum v. Raleigh Bd. of Adjustment, 362 N.C. 640, 644,

669 S.E.2d 279, 283 (2008).

       However, a different standard of review applies where a

party has moved to compel arbitration or to stay proceedings

pending arbitration:

              When a party disputes the existence of a
              valid arbitration agreement, the trial judge
              must determine whether an agreement to
              arbitrate   exists.     The   trial   court’s
              findings regarding the existence of an
              arbitration agreement are conclusive on
              appeal    where   supported   by    competent
              evidence, even where the evidence might have
              supported    findings   to   the    contrary.
              Accordingly, upon appellate review, we must
              determine whether there is evidence in the
                              -13-
         record supporting the trial court’s findings
         of fact and if so, whether these findings of
         fact in turn support the conclusion that
         there was no agreement to arbitrate.

         Before   a   dispute  can   be  settled   by
         arbitration, there must first exist a valid
         agreement to arbitrate.   [T]he moving party
         . . . bear[s] the burden of demonstrating
         that   the   parties   mutually  agreed   to
         arbitrate their dispute.

Sciolino v. TD Waterhouse Investor Servs., 149 N.C. App. 642,

645, 562 S.E.2d 64, 66 (citations omitted), disc. review denied,

356 N.C. 167, 568 S.E.2d 611 (2002).

    Thus, in the trial court, Defendant bore the burden of

establishing that the ADR provision existed and was valid, and

on appeal, we must affirm the trial court’s findings “regarding

the existence of an arbitration agreement . . . [if they are]

supported by competent evidence, even where the evidence might

have supported findings to the contrary.”   See id.   Simply put,

Defendant cannot treat the order appealed from as, in essence, a

ruling on a motion to compel arbitration in order to receive

immediate appellate review, and then characterize the same order

as a Rule 12(b) order to shift its burden of proof.

    The evidence before the trial court included both (1) the

Agreement which contained the ADR provision and (2) the Memo

which provided that the Agreement would be terminated on 31
                                     -14-
March 2011, at which point “both parties will be released of any

and all responsibilities/obligations (financial, operational, or

other),   with     the   sole   exception    of    the   $154,500   advancement

under Amendment . . . 1 . . . .”            The record on appeal does not

contain any evidence offered by Defendant that would controvert

this language in the Memo.           The Memo, attached to Plaintiff’s

complaint,    is    competent     evidence    which      supports   the   trial

court’s finding and conclusion “that there is no enforceable

agreement    between     the    [p]arties   with    respect   to    alternative

dispute resolution.”       Accordingly, the trial court’s order is

    AFFIRMED.

    Chief Judge MCGEE and Judge DIETZ concur.

    Report per Rule 30(e).