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Low Country Rural Health Education Consortium Inc. v. Greenway Medical Technologies Inc.

United States District Court, District of South Carolina, Beaufort Division

November 5, 2014

LOW COUNTRY RURAL HEALTH EDUCATION CONSORTIUM, INC., d/b/a HARRISON PEEPLES HEALTHCARE CENTER, Plaintiff,
v.
GREENWAY MEDICAL TECHNOLOGIES, INC., Defendant.

ORDER

DAVID C. NORTON, UNITED STATES DISTRICT JUDGE

This matter is before the court on the following motions: defendant Greenway Medical Technologies, Inc.’s (“Greenway”) motion to stay and compel arbitration, motion to dismiss or alternatively for a more definite statement, and motion for a protective order; and plaintiff Low Country Rural Health Education Consortium, Inc. d/b/a Harrison Peeples Healthcare Center’s (“Low Country”) motion to remand, motion to stay deadlines or alternatively for an extension of time, and motion to strike. For the reasons set forth below, the court grants Greenway’s motion to compel arbitration and dismisses the action without prejudice, denies Low Country’s motion to remand, and denies Low Country’s motion to strike. Accordingly, the remaining motions are rendered moot.

I. BACKGROUND

Low Country is a healthcare provider located in Hampton County, South Carolina. Greenway is an electronic medical records software provider doing business in Carroll County, Georgia. On February 29, 2012, Low Country and Greenway entered into a software license and services agreement for the purchase and installation of a medical records software program. Compl. ¶ 4. Low Country filed suit on January 30, 2014 in the Hampton County Court of Common Pleas. Low Country alleges that Greenway warranted that its system would enable Low Country to bill its patients and manage its medical practice and that the system would be installed in a professional and workmanlike manner. Id. Low Country further alleges that the system failed to perform as warranted and that Low Country was forced to revert to the system in place prior to the agreement. Id. ¶ 5. Lastly, Low Country claims that Greenway’s agent misrepresented that the system had not experienced any problems and that it operated properly and efficiently in other offices. Id. ¶ 8.

Greenway filed a notice of removal on March 12, 2014 asserting diversity jurisdiction under 28 U.S.C. § 1332. On March 19, 2014, Greenway filed a motion to stay and compel arbitration and a motion to dismiss. Low Country filed responses to both motions on April 21, 2014, and Greenway replied to both motions on May 15, 2014. On May 4, 2014, Low Country filed a motion to remand and a motion to stay deadlines or alternatively for an extension of time. Greenway filed a response to Low Country’s motion to remand on May 6, 2014, and Low Country filed a reply on May 8, 2014. Low Country filed a motion to strike on May 27, 2014, to which Greenway responded on June 13, 2014. On August 29, 2014, Greenway filed a motion for a protective order to stay discovery. Low Country filed a response to Greenway’s motion for a protective order on September 15, 2014, and Greenway filed a reply on September 25, 2014. These motions have all been fully briefed and are now ripe for the court’s review.

II. STANDARDS

A. Motion to Remand

The right to remove a case from state court to federal court is derived from 28 U.S.C. § 1441, which provides that “any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant . . . to the district court of the United States for the district and division embracing the place where such action is pending.” 28 U.S.C. § 1441(a). The party seeking to remove a case from state court to federal court bears the burden of demonstrating that jurisdiction is proper at the time the petition for removal is filed. Caterpillar Inc. v. Lewis, 519 U.S. 61, 73 (1996). If federal jurisdiction is doubtful, remand is necessary. Mulcahey v. Columbia Organic Chems. Co., 29 F.3d 148, 151 (4th Cir. 1994); Pohto v. Allstate Ins. Co., No. 10-2654, 2011 WL 2670000, at *1 (D.S.C. July 7, 2011) (“Because federal courts are forums of limited jurisdiction, any doubt as to whether a case belongs in federal or state court should be resolved in favor of state court.”). District courts have original diversity jurisdiction over a case “where the matter in controversy exceeds the sum or value of $75, 000, exclusive of interest and costs, and is between . . . citizens of different states.” 28 U.S.C. § 1332(a)(1).

B. Standard for Arbitration Under the FAA

Section 4 of the Federal Arbitration Act (“FAA”) provides in part that a “party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration may petition any United States district court . . . for an order directing that such arbitration proceed in the manner provided for in such agreement.” 9 U.S.C. § 4. “[Q]uestions of arbitrability must be addressed with a healthy regard for the federal policy favoring arbitration. . . . [A]ny doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration.” Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 23–24 (1983); Peoples Sec. Life Ins. Co. v. Monumental Life Ins. Co., 867 F.2d 809, 812 (4th Cir. 1989) (internal citations omitted). To that end, “the heavy presumption of arbitrability requires that when the scope of the arbitration clause is open to question, a court must decide the question in favor of arbitration.” Peoples, 867 F.2d at 812 (citing United Steelworkers of Am. v. Warrior & Gulf Navigation Co., 363 U.S. 574, 583 (1960)). Thus, the court may not deny a party’s request to arbitrate an issue “unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute.” Id.

Despite these policies favoring arbitration, federal courts have the authority to evaluate the validity of arbitration agreements. See Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 403–04 (1967) (“[A] federal court may consider only issues relating to the making and performance of the agreement to arbitrate.”). Section 2 of the FAA states that a written arbitration agreement “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. “If a party challenges the validity under § 2 of the precise agreement to arbitrate at issue, the federal court must consider the challenge before ordering compliance with that agreement under § 4.” Rent–A–Center, West, Inc. v. Jackson, 561 U.S. 63, 71 (2010). While federal law governs the arbitrability of disputes, state law governs issues regarding contract formation. Am. Gen. Life & Accident Ins. Co. v. Wood, 429 F.3d 83, 87 (4th Cir. 2005). A court shall compel arbitration pursuant to the FAA if a party demonstrates:

(1) the existence of a dispute between the parties, (2) a written agreement that includes an arbitration provision which purports to cover the dispute, (3) the relationship of the transaction, which is evidenced by the agreement, to interstate or foreign commerce, and (4) the failure, neglect or refusal of [a party] to arbitrate the dispute.

Id. (citing Adkins v. Labor Ready, Inc., 303 F.3d 496, 500–01 ...


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