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HSGCHG Investments, LLC v. Time Warner Cable Enterprises LLC

United States District Court, D. South Carolina, Florence Division

July 5, 2016

HSGCHG Investments, LLC, Plaintiff,
v.
Time Warner Cable Enterprises LLC, Defendant.

          ORDER

          R. Bryan Harwell United States District Judge.

         Currently pending before the Court is Defendant's motion to dismiss and compel arbitration [ECF #4] and Defendant's motion to dismiss and compel arbitration of second amended complaint [ECF #10]. Both parties have had the opportunity to extensively brief the issues raised in the motions to dismiss, and this Court has thoroughly considered all pleadings filed in this case.[1]

         Factual Background and Procedural History

         Plaintiff HSGCHG Investments, LLC ("HSGCHG") is a limited liability company organized under the laws of Delaware and doing business in Marion County, South Carolina. [ECF #6, p. 1]. According to Mr. Teja Shariff, Plaintiff's Chief Financial Officer, HSGCHG holds title to a certain piece of property where the Swamp Fox Entertainment Complex (the "Complex") is located. [ECF #14-2, p. 1]. The Complex is a venue for staging and producing live entertainment events. [ECF #14-2, p. 1]. Defendant Time Warner Cable Enterprises, LLC ("Time Warner") is a corporate entity organized under the laws of the state of Delaware and doing business in Marion County, South Carolina. [ECF #6, p. 1].

         The facts, as alleged in Plaintiff's second amended complaint, are as follows: on January 9, 2015, Plaintiff and Defendant entered into a contract, known as the Business Class Phone and Business Class Trunk Service Agreement (the "Agreement") wherein Plaintiff agreed to utilize the services provided by Defendant, including internet access, voice and data services, and fiber optic cable service as part of an event, the Swamp Fox Biker Bash, to be held at the Complex. [ECF #6, pp. 1-2]. The Agreement incorporates by reference Time Warner's Terms and Conditions ("Terms and Conditions"), which include, among other provisions, an arbitration provision in Section 21.0. [ECF #6, p.3, ¶ 12).

         Plaintiff alleges that Defendant defaulted on the Agreement by failing to install fiber optic cable in accordance with the agreed-upon schedule. [ECF #6, p. 2]. As a result, Plaintiff was forced to cancel the Swamp Fox Biker Bash, thereby causing Plaintiff damage and injury, including significant lost profits. [ECF #6, p. 2]. Thereafter, Plaintiff filed suit seeking a declaratory judgment regarding the rights and responsibilities of the parties under S.C. Code Ann. § 15-53-10 et seq. [ECF #6, p. 2]. Specifically, Plaintiff seeks a declaratory judgment rendering unenforceable Section 22.0 of the Terms & Conditions concerning venue and Section 14.0 limiting Defendant's liability. [ECF #6, p. 4]. Plaintiff acknowledges that the Terms and Conditions contains an arbitration provision in Section 21.0, and accordingly, also demand arbitration of its dispute with Defendant. [ECF #6, p. 3, ¶ 13]. Plaintiff does not otherwise dispute the validity of the arbitration agreement.

         On or about October 29, 2015, Time Warner removed this lawsuit to this Court from the Marion County Court of Common Pleas pursuant to 28 U.S.C. § 1332(a). [ECF #1]. On November 5, 2015, Defendant filed a motion to dismiss Plaintiff's complaint and compel arbitration. [ECF #4]. Thereafter, Plaintiff twice amended its complaint. [ECF #5; ECF #6]. Defendant then filed a subsequent motion to dismiss the second amended complaint and compel arbitration. [ECF #10], which is nearly identical to the original motion to dismiss. Plaintiff does not dispute that this lawsuit is subject to arbitration. [ECF #6, p. 3, ¶ 13]. Instead, the parties disagree on the arbitrability of two specific provisions within the Terms and Conditions.

         Standard of Review

         Defendant files its motion pursuant to 9 U.S.C. § 4, of the Federal Arbitration Act. The parties are in agreement that the currently-pending claim is subject to arbitration. Whether the parties have agreed to arbitrate their disputes is a jurisdictional question. See Bhd of Ry. & S.S. Clerks v. Norfolk S. Ry. Co., 143 F.2d 1015, 1017 (4th Cir. 1944). Here, the issue before this Court is whether certain specific provisions found in the Terms and Conditions, a document incorporated into the Agreement, are enforceable. Defendant argues that pursuant to the Agreement, the arbitrability of these provisions are questions for the arbitrator to determine based upon the plain language of the Agreement. [ECF #10, p. 2]. Plaintiff argues that this Court must determine whether these provisions are unconscionable, and therefore, enforceable, prior to subjecting the substantive claims to arbitration. [ECF #14, p. 2]. Because the issue before the Court is the jurisdictional question of arbitrability, the Court ordinarily considers the motion under a Rule 12 standard. Joyner v. GE Healthcare, No. 08-2563, 2009 WL 3063040, at *2 (D.S.C. Sept. 18, 2009). For the purposes of deciding a motion to compel arbitration, the court may properly consider documents outside the pleadings. Joyner v. GE Healthcare, No. 08-2563, 2009 WL 3063040, at *2 (D.S.C. Sept. 18, 2009).

         Discussion

         A. Delegation of Arbitrability to Arbitrator

         Plaintiff and Defendant agree that the Agreement governing their dispute incorporated another document entitled Terms and Conditions, which provides for arbitration of this dispute. [ECF #6, p. 3; ECF #10, pp. 1-2]. In fact, Plaintiff makes a demand for arbitration in its second amended complaint pursuant to Section 21.0 of the Terms and Conditions. [ECF #6, p. 3]. However, Plaintiff seeks a judicial determination that certain specific provisions within the Terms and Conditions, notably the forum selection clause contained within Section 21.0, Section 22.0 covering venue of the arbitration, and Section 14.0 limiting Defendant's liability, are unenforceable prior to submitting the actual dispute to arbitration. [ECF #6, p. 3]. In so arguing, Plaintiff argues that these provisions are unconscionable as a matter of state law. [ECF #6, p. 3]. Interestingly, Plaintiff relies on New York state law because the Terms and Conditions provide for New York law to govern all legal actions brought "under or in connection with the subject matter of the Master Agreement, " and therefore cite to New York state law in analyzing its unconscionability claim. [ECF #14, p. 3].[2]

         The Terms and Conditions contains the following ...


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