Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

The North Carolina Eye Bank, Inc. v. High Energy Ozone, LLC

United States District Court, M.D. North Carolina

December 11, 2019

THE NORTH CAROLINA EYE BANK, INC., d/b/a MIRACLES IN SIGHT, Plaintiff,
v.
HIGH ENERGY OZONE, LLC, et al., Defendants.

          MEMORANDUM OPINION AND RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE

          Joe L. Webster, United States Magistrate Judge

         This matter is before the Court on Defendants High Energy Ozone, LLC (“HEO3”), John C. Neister, and S. Edward Neister's motion to dismiss or, in the alternative, to stay pending mediation. (Docket Entry 8.) The motion has been fully briefed, and the matter is ripe for disposition. (See generally Docket Entries 9, 13, and 14.) For the reasons that follow, it is recommended that Defendants' motion be denied in part, with respect to dismissal of Plaintiff's claims, but granted in part, with respect to staying this action pending mediation.

         I. BACKGROUND

         Plaintiff, The North Carolina Eye Bank, Inc. d/b/a Miracles In Sight (“MIS”), filed this diversity jurisdiction action pursuant to 28 U.S.C. § 1332 against Defendants. (Compl. ¶ 5, Docket Entry 1 at 3.) On or around March 31, 2016, the Neisters formed HEO3 to commercialize Far-UV Sterilray (“Technology”), a technology patented by Defendant S. Edward Neister that relates to disinfection devices. (Id. ¶¶ 9-10.) Based on the potential use of the Technology, MIS, a nonprofit eye bank, invested a total of $2 million in HEO3: the first tranche of $1 million in or around June 2016, and the second tranche of $1 million in or around April 2017. (Id. ¶ 29.) These investments were made pursuant to a Unit Purchase Agreement between HEO3 and MIS, which the parties signed on June 21, 2016. (Id. ¶ 13; see also Ex. A, Docket Entry 1-1.) Plaintiff and Defendants John Neister and S. Edward Neister also entered into a Limited Liability Company Agreement (“Operating Agreement”) on June 21, 2016. (Compl. ¶ 25; see also Ex. D, Docket Entry 1-4). Plaintiff and Defendant HEO3 also entered into a Memorandum of Understanding (“MOU”) on April 10, 2017. (Ex. F, Docket Entry 1-6.)

         Plaintiff alleges that Defendants “made several material representations and warranties, on which [MIS] actually, reasonably, and justifiably relied to its detriment, ” which resulted in Plaintiff's decision to bring this suit against Defendants on June 19, 2019. (Compl. ¶ 17.) Specifically, Plaintiff alleges various causes of action: fraud; negligent misrepresentation; unfair and deceptive trade practices; breach of contract;[1] breach of implied duty of good faith and fair dealing; breach of fiduciary duties;[2] constructive fraud; tortious interference with contract and/or prospective economic advantage; and alter ego/piercing the corporate veil. (Id. ¶¶ 47-122.) Plaintiff seeks compensatory damages, punitive damages, and costs of suit. (Compl. Prayer for Relief, Docket Entry 1 at 25-26.)

         Defendants have filed a motion to dismiss pursuant to Rule 12(b)(1), Rule 12(b)(6), or the Court's inherent power and discretion to control its docket; alternatively, Defendants move for a stay of this matter pending mediation. (Docket Entry 8 at 1.) Defendants contend that, “[u]nder the governing contract, [the Unit Purchase Agreement, ] pre-suit mediation is a mandatory condition precedent to filing suit. Because the Plaintiff has failed to mediate this dispute prior to bringing suit, the Court should dismiss this action . . . [or] . . . stay this action pending the required mediation.” (Docket Entry 9 at 1-2.)

         In particular, Defendants cite to Section 7.14 of the Unit Purchase Agreement between HEO3 and MIS, which provides:

Dispute Resolution. In the event of any dispute regarding the interpretation, breach or enforcement of this Agreement, the parties will first endeavor to resolve such dispute through direct discussions between the chief executive officers of the Company [HEO3] and the Purchaser [MIS]. If such discussions do not result in a resolution, then the parties will submit the dispute to mediation with a mediator reasonably acceptable to the Company [HEO3] and the Purchaser [MIS] for a period of not less than thirty (30) days. If such mediation does not result in a resolution of the dispute, either party may bring an action in court.

(Ex. A, Docket Entry 1-1 at 16.)

         Defendants first state that New Hampshire law should apply to the contract because a federal court in North Carolina exercising diversity jurisdiction must apply North Carolina law regarding choice-of-law, which gives effect to a contract's choice-of-law provision. (Docket Entry 9 at 4.) Defendants cite to Section 7.4 of the Unit Purchase Agreement, which provides

Governing Law. This Agreement shall be governed by the internal law of the State of New Hampshire, without regard to conflict of law provisions.

(Ex. A, Docket Entry 1-1 at 15.) Defendants contend that, under New Hampshire law, clear and unambiguous contractual terms can create a condition precedent to filing suit, and, since the terms of Section 7.14 of the Unit Purchase Agreement are clear and unambiguous, mediation is a condition precedent to filing suit. (Docket Entry 9 at 5-6.) Because Plaintiff did not comply with this condition precedent, Defendants move to dismiss or, in the alternative, stay Plaintiff's complaint pending mediation. (Docket Entry 8 at 1.)

         In opposition to Defendants' motion to dismiss, Plaintiff first argues that the contract provision on which Defendants rely for arguing that mediation is a condition precedent to filing suit-Section 7.14 of the Unit Purchase Agreement-is “not expansive” but instead “limited to disputes ‘regarding the interpretation, breach or enforcement' of the Unit Purchase Agreement, a scope that only arguably encompasses a fraction of the parties and claims at issue.” (Docket Entry 13 at 11-12.) Specifically, only Defendant HEO3 was a party to the Unit Purchase Agreement, but Plaintiff alleges claims against HEO3, John C. Neister, and S. Edward Neister. (Id. at 11.) Additionally, Plaintiff has alleged eleven causes of action but contends that the vast majority of these causes of action concern various tort and statutory claims as well as the Operating Agreement and MOU and are, thus, not subject to the mediation provision in the Unit Purchase Agreement. (Id.)

         Second, Plaintiff contends that, even if the mediation provision in the Unit Purchase Agreement applies to its causes of action, Defendants waived the right to rely on the contractual mediation provision and are estopped from asserting that provision. (Id. at 12-13.) To support this argument, Plaintiff argues that “[MIS] made repeated efforts to resolve its concerns prior to filing suit, but Defendants refused to address [MIS's] concerns . . . [and] [d]ue to Defendants' unwillingness to meet, talk, or share information voluntarily, [MIS] had no choice but to file this action to enforce its rights.” (Id. at 13.)[3]

         Finally, Plaintiff argues that dismissal is not appropriate under either Rule 12(b)(1) or Rule 12(b)(6). (Docket Entry 13 at 13-16.) Moreover, Plaintiff argues that dismissal without prejudice “would be needlessly inefficient and costly for all involved.” (Id. at 15.) Plaintiff also argues that “there would be no harm to the Defendants from staying, rather than dismissing the claims, pending completion of the mediation.” (Id.) Defendants have filed a reply brief contesting Plaintiff's three arguments. (See generally Docket Entry 14.)

         II. DISCUSSION

         A. ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.