North Carolina Business Litigation Report

Green v. Short, 2007 NCBC 8 (N.C. Super. Mar. 9, 2007)(Diaz)

The Court considered in this case the scope of an arbitrator's authority with regard to disputes involving a North Carolina LLC. It first determined that the interpretation of the arbitration clause before it was subject to the Federal Arbitration Act, because the contract was a "transaction involving commerce."

It held that whether a dispute is subject to arbitration is a question of law for the Court, and that doubts should be resolved in favor of arbitration. Here, the parties to the agreement had agreed to a broad clause, which mandated arbitration on "any controversy or claim arising out of or relating to this Agreement, or to the interpretation, breach of enforcement thereof."

The Court held that a non-signatory to the arbitration agreement was entitled to rely upon it to invoke arbitration, because the claims made by the plaintiff were "intertwined" with the agreement, as every claim made in the complaint flowed from the agreement containing the arbitration clause.

The Court further held that all of the claims made were subject to arbitration, including claims for injunctive relief, for the appointment of a receiver, for the dissolution of the LLC, and for punitive damages. It stated that "[b]y specifically adopting the AAA commercial rules as the default mechanism for arbitration, the parties here bargained to have an arbitrator determine the merits of any request for injunctive relief, including requests for injunctions and the appointment of a receiver."

The Court found that there was no basis for it to retain jurisdiction in order to enter preliminary injunctive relief. The Court noted, among other things, that the AAA Rules provide streamlined procedures for obtaining interim equitable relief.

Full Opinion

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Mack Sperling
Brooks Pierce, LLP
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