United States District Court, D. South Carolina, Columbia Division
ORDER AND OPINION
Honorable Margaret B. Seymour Senior United States District
Pizza, LLC (“Plaintiff”) sued Integrity Brands,
Inc. (“Defendant”) in South Carolina state court
for violation of Business Opportunity Sales Act (S.C. Code
Ann. §§ 39-57-10 et seq.), declaratory
judgment, and in the alternative, breach of contract. ECF No.
1-1. Defendant removed to federal court on the basis of
diversity jurisdiction. ECF No. 1; see 28 U.S.C.
§ 1332. Defendant then moved to dismiss for lack of
personal jurisdiction pursuant to Federal Rule of Civil
Procedure 12(b). ECF No. 9. Defendant argues that
Plaintiff's claims are directly related to a contract
requiring binding arbitration in the State of Georgia.
Id. at 1. Plaintiff opposes the motion. ECF No. 11.
Plaintiff disputes there is a signed contract requiring
arbitration. Id. at 1.
is involved in the sale and development of pizza restaurant
franchises under the trademark of “Uncle Maddio's
Pizza Joint.” Defendant is based in Georgia. Plaintiff
is a South Carolina limited liability company owned by Ted
and Marcia Contos. Plaintiff's owners own another limited
liability company named “Thea and Theo's
LLC.” ECF No. 11-2.
April 2012, Defendant entered into a Market Development
Agreement (the “Agreement”) with Thea and
Theo's LLC. ECF No. 9 at 1. The Agreement requires
arbitration for various types of disputes. ECF No. 9-1 at 12.
The Agreement is not equivalent to a franchise agreement. The
Agreement notes that a separate franchise agreement should be
executed prior to opening and operating a restaurant. ECF No.
9-1 at 5. In Spring 2013, Plaintiff began operating as an
“Uncle Maddio's Pizza Joint” franchisee but
without a signed franchise agreement. ECF No. 1 at ¶ 10.
In March 2014, Mr. Contos sent an email to Tony Brewer, who
works for Defendant, noting that Defendant brought up signing
the franchise agreement on “at least three different
occasions” but Mr. Contos stated he “cannot
execute any agreement that places us in more financial
hardship and very frankly removes any responsibility of
[Defendant] by a document that is very one-sided to the
benefit of [Defendant].” ECF No. 11-3 at 3. Mr. Contos
attached an amended, executed franchise agreement to his
email. Id. As pertinent here, the proposed, signed
franchise agreement eliminated “Section 31: Government
Law and Enforcement, ” which provided the requirement
to enter into arbitration. See ECF No. 11-3 at 3;
ECF No. 9-2 at 39-41. Defendant acknowledges there is no
signed franchise agreement. ECF No. 9 at 6.
Federal Arbitration Act (“FAA”), 9 U.S.C.
§§ 1 et seq., governs whether a party must
submit a dispute to arbitration. The FAA provides that
“[a] written provision in . . . a contract evidencing a
transaction involving commerce to settle by arbitration a
controversy thereafter arising out of such contract . . .
shall be valid, irrevocable, and enforceable, save upon such
grounds as exist in law or in equity for the revocation of
any contract.” 9 U.S.C. § 2. The Fourth Circuit
Court of Appeals has stated that to compel arbitration,
Defendant must demonstrate (1) the existence of a dispute
between the parties; (2) a written agreement that includes an
arbitration provision that purports to cover the dispute; (3)
the relationship of the transaction, as evidenced by the
agreement, to interstate or foreign commerce; and (4) the
failure, neglect, or refusal of Plaintiff to arbitrate the
dispute. See Adkins v. Labor Ready, Inc., 303 F.3d
496, 500-01 (4th Cir. 2002); Whiteside v. Teltech
Corp., 940 F.2d 99, 102 (4th Cir. 1991).
though courts view arbitration agreements favorably, an
“underlying agreement between the parties to
arbitrate” must exist. Arrants v. Buck, 130
F.3d 636, 640 (4th Cir. 1997). “[A]rbitration is a
matter of contract and a party cannot be required to submit
to arbitration any dispute which he has not agreed so to
submit.” Howsam v. Dean Witter Reynolds, Inc.,
537 U.S. 79, 83 (2002). Arbitration agreements are required
because parties are agreeing to waive their fundamental right
to have a court decide the merits of their disputes. See
First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 942
determines the existence of an agreement by the parties to
arbitrate “according to common law principles of
contract law.” Arrants, 130 F.3d at 640.
Federal courts sitting in diversity apply state contract law
principles when determining whether a valid arbitration
agreement exists. First Options, 514 U.S. at 944. In
South Carolina, the necessary elements for a contract are
offer, acceptance, and valuable consideration. Roberts v.
Gaskins, 486 S.E.2d 771, 773 (S.C. 1997). Contracts may
also be implied by conduct. See Conner v. City of Forest
Acres, 363 S.E.2d 905, 912 (S.C. 2005).
and Plaintiff provide no evidence that Defendant accepted
Plaintiff's offered contract or that Plaintiff accepted
Defendant's offered contract. Defendant argues that it is
“impossible for Plaintiff to operate a restaurant
without the permission of Defendant and Developer.”
While it may be impossible for Plaintiff to operate without
permission of Defendant, that does not signify Plaintiff
signed a contract or otherwise agreed to submit disputes to
arbitration. The court will not impute an agreement to
arbitrate where Plaintiff has not explicitly agreed to do so.
In fact, Plaintiff refused in March 2014 to sign the
franchise agreement with an arbitration agreement. ECF No.
11-3. Plaintiff's restaurant has continued operating
since the date of the March 2014 email and was operating for
over a year prior without a written contract. See
next argues that the Agreement signed by Thea and Theo's
LLC is applicable to the current dispute between Plaintiff
and Defendant. ECF No. 9 at 6. Defendant conclusively argues
that Plaintiff is basing its claim on “rights and
privileges granted by the [Agreement] and the Franchise
Agreement”; therefore, Plaintiff is bound by the
arbitration clause. Id. at 6-7. Defendant has
provided no factual or legal support on how an agreement with
a separate legal entity applies to Plaintiff. The court finds
that there was no underlying agreement to arbitrate.
reasons stated above, Defendant's motion to dismiss for
lack of ...