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Caldwell, Wright Enterprises, Inc. v. Avadim Health, Inc.

United States District Court, W.D. North Carolina, Asheville Division

August 26, 2019

CALDWELL, WRIGHT ENTERPRISES, INC., Plaintiff,
v.
AVADIM HEALTH, INC., Defendant.

          MEMORANDUM OF DECISION AND ORDER

          MARTIN REIDINGER UNITED STATES JUDGE

         THIS MATTER is before the Court on the Plaintiff's Motion for Partial Summary Judgment [Doc. 35] and the Defendant's Renewed Motion to Compel Arbitration and Stay Proceedings. [Doc. 39].

         I. BACKGROUND

         Caldwell Wright Enterprises, Inc. (the “Plaintiff”) and Avadim Health, Inc. (the “Defendant”) entered into a distribution agreement in March 2014. [Doc. 14 at 6]. The distribution agreement gave the Plaintiff the right to market and sell the Defendant's products in a certain market. [Doc. 1 at ¶ 13].

         In 2015, the Defendant acquired the Plaintiff's business. [Id. at ¶ 15]. The parties documented the acquisition by signing a written “Agreement of Purchase and Sale” (the “Agreement”). [Id. at ¶ 15]. The Agreement stated that the Defendant would acquire substantially all of the Plaintiff's assets, including the distribution agreement, in exchange for (1) an amount of the Defendant's stock and (2) a percentage of receivables from the sales of some of the Defendant's products. [Id. at 20-21]. The section of the Agreement detailing the products for which the Plaintiff would receive a royalty states that:

[The Defendant] agrees to pay [the Plaintiff] a portion of payment received by [the Defendant] resulting from sales, licensing, private labeling, and/or distribution of its products specifically (1) intended for topical use and (2) marketed for use by athletes or in connection with athletics, sports, training, or exercise (the “Innergy Products”) to customers in the U.S.A., its territories and possessions, including the District of Columbia . . . however, that products marketed specifically (1) to hunters, campers, and fisherman, or (2) for use in hunting, camping or fishing shall not be deemed to be Innergy Pr

[Id. at 20-21 (emphasis added)].

         The Agreement also has a section detailing how the parties are to resolve disputes regarding the royalty payments. [Id. at 21]. According to that section, such a dispute

shall be resolved by an accounting firm mutually agreed upon by [the Plaintiff] and [the Defendant] or, failing such agreement within thirty (30) days following notice of the dispute by [the Plaintiff], then upon the written request of either [the Plaintiff] or [the Defendant], such nationally recognized independent accounting firm selected by the International Institute for Conflict Prevention & Resolution (“CPR”) in accordance with the CPR Non-Administered Arbitration Rules (such identified accounting firm, or if applicable, the other firm selected, the “Accountant”). Such Accountant shall be instructed to make a final determination of such payment . . . [and] [s]uch determination shall be final and binding on the Parties.

[Doc. 1 at 21-22].

         On October 11, 2018, the Plaintiff filed the present action against the Defendant, asserting claims for breach of contract, indemnification, declaratory judgment, specific performance, accounting, and an award of attorneys' fees. [Id. at ¶¶ 39-62]. The Plaintiff alleges that the Defendant failed to pay the Plaintiff the appropriate royalty for sales of products that were subject to the royalty provision. [See id.].

         On November 21, 2018, the Defendant answered the Complaint, claiming that no contract ever existed between the parties because there was “no meeting of the minds” regarding the products to be included within the royalty provision of the Agreement. [Doc. 14 at 1-11]. The Defendant also asserted a counterclaim against the Plaintiff for “rescission of agreement of purchase and sale.” [Id. at ¶¶ 1-11]. On December 11, 2018, the Plaintiff answered the Defendant's counterclaim. [Doc. 17].

         On December 4, 2018, the Defendant filed a Motion to Compel Arbitration and to Stay Proceedings. [Doc. 15]. On December 18, 2018, the Plaintiff filed a Response to the Motion to Compel Arbitration and Stay Proceedings. [Doc. 18]. The Court held a hearing on the Defendant's motion on May 8, 2019. [Doc. 34]. On May 22, 2019, the Court denied the Defendant's Motion to Compel Arbitration and to Stay Proceedings pending resolution of the Defendant's counterclaim for rescission. [Id. at 3]. Specifically, the Court ruled that it first needed to ascertain whether a valid agreement exists between the parties before determining whether arbitration should be compelled. [Id.]. If there is no agreement, then there is no agreement to arbitrate.

         On July 11, 2019, the Plaintiff filed a Motion for Partial Summary Judgment on the Defendant's Counterclaim. [Doc. 35]. On July 11, 2019, the Defendant filed a Motion to Dismiss its Counterclaim without prejudice. [Doc. 38]. The Plaintiff refused to consent to the Defendant's motion unless the Defendant dismissed the counterclaim with prejudice. [Doc. 37 at 3]. On July 24, 2019, the Plaintiff filed a Response to the Defendant's Motion to Dismiss its Counterclaim. [Doc. 42]. On July 24, 2019, the Defendant filed its Response to the Plaintiff's Motion for Partial Summary Judgment ...


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