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Beautyko, LLC v. Fedex Ground Package System, Inc.

United States District Court, S.D. New York

January 16, 2015

BEAUTYKO, LLC d/b/a BEAUTY AMERICA, Plaintiff,
v.
FEDEX GROUND PACKAGE SYSTEM, INC., FEDEX SMARTPOST, INC., and NOMORERACK.COM, INC., Defendants.

OPINION AND ORDER

RONNIE ABRAMS, District Judge.

In this action for non-delivery of goods, Defendant Nomorerack.com, Inc. ("NMR") moves to dismiss and compel arbitration pursuant to an arbitration provision in a supplier agreement (the "Agreement") entered into between it and Plaintiff Beautyko, LLC d/b/a Beauty America ("Beautyko") on November 13, 2012. Despite the fact that Beautyko previously filed a demand for arbitration based on the same Agreement concerning the same subject matter at issue in this litigation, it now claims that the Agreement is invalid and unconscionable. For the reasons that follow, NMR's motion to compel arbitration is granted and Beautyko's claims against it are dismissed.

BACKGROUND

I. Procedural History

Beautyko, a wholesale company, first filed this action against three defendants-Federal Express Corporation, FedEx Ground Package System, Inc., and FedEx Corporation-in New York State court on November 13, 2013, alleging negligence and breach of contract in the shipment of products from Beautyko's offices in New York to its customers. (Dkt. 1.) On January 2, 2014, all three Defendants properly removed the action to this Court.[1] (Dkt. 1.) On April 9, 2014, Beautyko filed an Amended Complaint naming two additional defendants: FedEx Smartpost, Inc. and NMR. (Dkt. 31 ("Am. Compl.").)

The Amended Complaint raises three contractual causes of action against NMR, all of which seek damages, and all of which appear to relate to NMR's purported violation of the Agreement: breach of contract, "for work, labor and services performed, " and "for an action stated." (Am. Compl. 4-6.) NMR filed the instant motion to dismiss and compel arbitration of these three claims on June 9, 2014. (Dkt. 46 (-MTD").) Several months later, Beautyko stipulated to the dismissal-without prejudice-of Federal Express Corporation and FedEx Corporation, leaving only NMR. along with FedEx Ground Package System, Inc. and FedEx Smartpost, Inc., as defendants. (Dkt. 59.)

II. The Agreement

NMR is an "online retailer that offers a variety of products to consumers at discount prices." (MTD 2.) Under its Agreement with Beautyko, NMR was to feature Beautyko's products for sale on its website for the five-month period from November 2012 to March 2013, with Beautyko essentially functioning as NMR's warehouse and shipper: NMR would purchase from Beautyko those products it wished to feature on its website, and if a customer on NMR's website purchased the featured products, Beautyko would fulfill the orders by shipping them from Beautyko's offices in New York to the customer directly. (Id.)

The Agreement was signed by Avi Sivan, Managing Partner for Beautyko, on November 13, 2012. (Dkt. 47 Ex. A ("Agreement").) No one appears to have signed the Agreement on behalf of NMR, and NMR does not contend otherwise.

The terms of the Agreement govern the underlying dispute between the parties. Relevant here, however, is the Agreement's "Dispute Resolution" provision, which requires that, as "a condition precedent to any other legal recourse (unless such legal recourse seeks injunctive relief), the Parties shall make good faith efforts to come to resolution." (Agreement ยง 15(i).) The Agreement specifies the form these "good faith efforts" should take, and also includes an arbitration provision ("Arbitration Provision") as to any dispute the parties are unable to resolve:

The parties shall submit any unresolved dispute to binding arbitration before the American Arbitration Association... with proceedings to take place in New York, N.Y., to be adjudicated in accordance with AAA's expedited procedures before a single arbitrator. In the event of arbitration, the Parties shall be responsible for their own legal fees and expenses, and the costs and expenses of the arbitrator and any fees charged by the AAA shall be apportioned equally between the Parties.

Id.

It is pursuant to this provision that NMR seeks to compel arbitration, and it is the validity, construction, and scope of this provision ...


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