An unpublished opinion of the North Carolina Court of Appeals does not constitute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
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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
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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
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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
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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.
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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.
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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
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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
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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
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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
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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
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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
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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
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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).