TRC Elecs., Inc. v. Agrify Corp.

688 F.Supp.3d 225

TRC ELECTRONICS, INC., Plaintiff v. AGRIFY CORPORATION, Defendant

CIVIL ACTION NO. 23-1445

United States District Court, E.D. Pennsylvania

Signed August 22, 2023

Blaine R. Feinauer, Margaret Grace Clark, Saul Ewing Arnstein & Lehr LLP, Wayne, PA, for Plaintiff.

Richard M. Beck, Doher Joseph Ferris, Jr., Klehr, Harrison, Harvey, Branzburg LLP, Philadelphia, PA, for Defendant.

MEMORANDUM OPINION

NITZA I. QUIÑONES ALEJANDRO, District Judge

INTRODUCTION

Plaintiff TRC Electronics Incorporated ("TRC" or "Plaintiff") filed this breach of contract action against Defendant Agrify Corporation ("Agrify" or "Defendant") premised on Defendant's failure to remit payment for specially ordered merchandise procured by Plaintiff for Defendant resulting in a loss of more than $565,000 in damages. Before this Court is Defendant's motion to compel arbitration filed pursuant to Federal Rule of Civil Procedure 12(b)(6) or, alternatively, to stay the proceedings pursuant to 9 U.S.C. § 3. Plaintiff opposes the motion and disputes that the parties' agreement includes an arbitration provision. The issues raised by the parties have been fully briefed and are ripe for disposition. For the reasons set forth herein, Defendant's motion to compel arbitration and/or stay is denied.

BACKGROUND

The facts relevant to Defendant's motion are as follows:¹

Plaintiff is a wholesale distributor of electronic components with a principal place of business in Pennsylvania. Defendant is a provider of cultivation and extraction solutions for the cannabis industry with its principal place of business in Massachusetts.

In December 2020, Defendant submitted a written credit application (the "Credit Contract") seeking credit privileges from Plaintiff. The Credit Contract provided Defendant a thirty-day payment term for future orders rather than requiring upfront payment. The Credit Contract also provided that, "[a]ll bids and quotations issued by, and all orders for products accepted by, TRC shall be governed by TRC's standard Terms and Conditions of Sale, a copy of which can be accessed on TRC's website and is incorporated herein by reference." (Compl., ECF 1, ¶ 7). Plaintiff's standard Terms and Conditions ("Plaintiff's Terms and Conditions") provide, inter alia, that:

Any dispute arising out of or in connection with any Order, Product or the relationship of TRC and Buyer will be adjudicated exclusively in the state courts for Bucks County, Pennsylvania or the federal courts for the Eastern District of Pennsylvania, and all parties consent to personal jurisdiction and venue therein . . . .

(Pl.'s Terms and Conditions, Compl. Ex. B, ECF 1-4, at p. 5). Plaintiff's Terms and Conditions also include a clause making Plaintiff's acceptance of any future order expressly conditional upon the buyer's—here, Defendant's—assent to the terms therein. Plaintiff's Terms and Conditions also provide that "Special Orders," defined as orders that are manufactured specifically to fulfill the buyer's order, are "non-cancelable" and "non-returnable."

In February, June, and July 2022, Defendant submitted to Plaintiff three separate written purchase orders ("Defendant's Purchase Orders" or the "Purchase Orders") for specific merchandise. Each of the Purchase Orders includes the quantity, price, thirty-day payment term, and shipping location. Each also includes Defendant's standard terms and conditions ("Defendant's Terms and Conditions") in their entirety. Specifically, Defendant's Terms and Conditions provide, in part, that "[a]ny controversy arising out of or relating to an Order, including any modification or amendment thereof, shall, at Buyer's option, be resolved by arbitration within 25 miles of Burlington, Massachusetts pursuant to the rules of the American Arbitration Association." (Def.'s Purchase Order No. 2764, Compl. Ex. C, ECF 1-5, at p. 5). Defendant's Terms and Conditions also include provisions limiting Defendant's acceptance to the terms of Defendant's Purchase Order and preemptively rejecting any additional or different terms of the seller. These limiting provisions provide, in relevant part:

Any terms in Seller's Order acknowledgment, sales literature, quotations, invoice, or any other documents which are in conflict with or in addition to these terms stated on the face or back hereof are hereby deemed to be material alterations to the terms of an Order and . . . notice is hereby given to Seller that any such terms are rejected.

Seller's commencement of work on or shipment of Goods covered by an Order shall be deemed an effective mode of acceptance of Buyer's offer to purchase contained in such Order. Any acceptance of a purchase set forth in an Order is limited to acceptance of the express terms of such Order and these terms and conditions. Any proposal for additional or different terms or any attempt by Seller to vary, in any degree, any of the terms of an Offer or these terms and conditions in Seller's acceptance by sales confirmation or otherwise shall not operate as a rejection of such Offer, unless such variance is in the terms of the description, quantity, price, or delivery schedule of identified Goods, which shall be considered a material alteration thereof, and the offer set forth in such Offer shall be deemed accepted by Seller without said additional or different terms. If an Order shall be deemed an acceptance of a prior offer by Seller, such acceptance is expressly conditional on Seller's assent to any additional or different terms contained in such Offer.

(Def.'s Purchase Order No. 2764, Compl. Ex. C, ECF 1-5, at p. 4).

After Defendant submitted each of the Purchase Orders, Plaintiff issued a timely, written order acknowledgment to Defendant ("Plaintiff's Order Acknowledgment") which again expressly incorporate Plaintiff's Terms and Conditions listed on Plaintiff's website.

Once each order had been submitted and acknowledged, Plaintiff promptly placed orders with its overseas manufacturer to fulfill Defendant's Purchase Orders in a timely manner. Defendant then paid an $88,244 deposit to enroll in the Lead Time Guarantee Program which was to be applied to the balance of the final Purchase Order.

In July 2022, Plaintiff began delivering Defendant's ordered components and issued an invoice for $56,758. Defendant paid only $20,000 toward the balance of the July 2022 invoice. In October 2022, Plaintiff made another delivery to Defendant and issued an invoice for $41,175. Defendant, however, made no payment toward the October 2022 invoice. Because of Plaintiff's belief that Defendant would not be able to pay for the merchandise ordered in the third Purchase Order, Plaintiff withheld delivery. Defendant sought to cancel its final Purchase Order after Plaintiff had already procured the ordered components. Plaintiff advised Defendant that the Purchase Order was non-cancelable.

As noted, Plaintiff asserts various contract-based claims premised on Defendant's alleged failure to fully pay for goods ordered from and provided by Plaintiff, as well as claims regarding Defendant's attempt to rescind an order specified as non-cancelable. In its response to the complaint, Defendant moves to compel arbitration, relying on an arbitration provision in Defendant's Terms and Conditions. Plaintiff opposes Defendant's motion, arguing that Plaintiff never agreed to arbitrate and that Defendant is bound by Plaintiff's Terms and Conditions incorporated within the Credit Contract and Plaintiff's Order Acknowledgements. Alternatively, Plaintiff argues that the writings exchanged by the parties contain conflicting terms should be "knocked out" by application of Uniform Commercial Code ("U.C.C.") § 2-207.

LEGAL STANDARD

When addressing a motion to compel arbitration, the Court must first determine the standard of review to apply; to wit: either the standard applied to motions to dismiss under Federal Rule of Civil Procedure ("Rule") 12 or that applied to motions for summary judgment under Rule 56. Guidotti v. Legal Helpers Debt Resol., L.L.C., 716 F.3d 764, 773-74 (3d Cir. 2013). The United States Court of Appeals for the Third Circuit (the "Third Circuit") clarified in Guidotti that a Rule 12 standard is the appropriate standard of review "[w]here the affirmative defense of arbitrability of claims is apparent on the face of a complaint (or . . . documents relied upon in the complaint)." Id. at 773 (internal quotation omitted). Additionally, the Third Circuit has deemed it appropriate to consider exhibits attached to the complaint during the motion to dismiss stage. See Pension Benefit Guar. Corp. v. White Consol. Indus., Inc., 998 F.2d 1192, 1196 (3d Cir. 1993) (citation omitted). Here, this Court finds that the Rule 12 standard is the appropriate standard because the affirmative defense of arbitrability is apparent from the documents attached to the complaint.

When applying the motion to dismiss standard under Rule 12(b)(6), "the court evaluates the merits of the claims by accepting all allegations in the complaint as true, viewing them in the light most favorable to the plaintiffs, and determining whether they state a claim as a matter of law." Gould Elecs. Inc. v. United States, 220 F.3d 169, 178 (3d Cir. 2000). In the context of a 12(b)(6) motion seeking to compel arbitration, "[the court] look[s] to the complaint and the documents on which it relies and will compel arbitration only if it is clear, when read in the light most favorable to the [non-moving party], that the parties agreed to arbitrate." Robert D. Mabe, Inc. v. OptumRX, 43 F.4th 307, 325 (3d Cir. 2022).

DISCUSSION

As noted, Plaintiff asserts various contract-based claims premised upon its contractual relationship with Defendant, and Defendant moves to compel arbitration of Plaintiff's claims. The parties' respective arguments for and against arbitration will be addressed and analyzed in turn. At the outset, however, this Court will briefly address the choice-of-law rules as applicable to this case.

Choice of...