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Partial Final Award Granting Respondents' Partial Motion to Dismiss Claimant's Amended Claim and Denying Claimant's Motion to Amend Claim

I, THE UNDERSIGNED ARBITRATOR, having been designated in accordance with the arbitration agreement entered into between the parties and dated October 7, 2011, and having been duly sworn, and having duly heard the proofs and allegations of the parties regarding Respondents’ Partial Motion to Dismiss Claimant’s Amended Claim and regarding Claimant’s Motion to Amend Claim (collectively, the "Motions"), do hereby, AWARD, as follows:
[1].
Claimant, Gordon Gravelle, o/a CodePro Manufacturing ("Gravelle"), is represented by Barry Leon and Owen Bourne. Respondents, Kaba Ilco Corp. ("Kaba") and Chuck Murray ("Murray"), are represented by Mark Vasco and Peggy Kane. The parties have submitted briefs and other materials in support of their respective positions on the Motions, and the Motions are ripe for decision.
[2].
For the reasons set forth herein, the Arbitrator concludes that Respondents’ Partial Motion to Dismiss Claimant’s Amended Claim should be granted, and that Claimant’s Motion to Amend Claim should be denied.

A. Respondents' Partial Motion to Dismiss Claimant’s Amended Claim.

[3].
Respondents’ Partial Motion to Dismiss Claimant’s Amended Claim ("Respondents’ Motion"), filed on or about January 6, 2012, seeks dismissal of Claimant’s claims for misrepresentation (fraud), breach of contract as to the parties’ 2006 Agreement, violation of the North Carolina Unfair and Deceptive Trade Practices Act ("UDTPA"), and punitive damages.

1. Allegations of the Amended Claim

a) The Parties

[4].
Claimant Gravelle does business as CodePro Manufacturing in Ontario, Canada. (Amended Claim dated October 28, 2011, at ¶ 2) (hereafter, "Amended Claim") CodePro designs and produces electronic key-cutting equipment. (Id.) CodePro has sold its key-cutting machine, the CodePro 4500 ("CP4500"), in North America and abroad. (Id.)
[5].
Respondent Kaba is a global corporation that manufactures and sells key blanks, key-cutting machines, security products, and other related products. (Id. ¶ 3) Since 2004, Respondent Murray has been employed as Kaba’s General Manager in Rocky Mount, North Carolina. (Id. ¶ 4)

b) Negotiations Between the Parties

[6].
Gravelle demonstrated the CP4500 machine to Murray and two other Kaba employees on July 23, 2004. (Id. ¶ 9) After the demonstration, Gravelle met with Murray to discuss a potential business relationship between Gravelle and Kaba. (Id. ¶ 10)
[7].
Negotiations between Gravelle and Kaba continued for two years over the terms of a potential deal. (Id. ¶ 11) Eventually, Kaba made a written offer to purchase the CP4500 and its source code from Gravelle, provided that Gravelle undertake certain modifications to the source code to allow for indirect key codes, and to the machine’s software to enable it to cut two-sided keys. (Id. 13-14) With those modifications, Kaba intended to market the key-cutting machine under the name "EZ-Code." (Id. ¶ 13)
[8].
Gravelle alleges that, to induce him to enter into the deal, Murray represented that: (i) there would be additional joint projects between the parties in the future; (ii) Kaba would enter into a future agreement with Wal-Mart to supply a product that would combine the EZ-Code and a key reader device; (iii) Kaba projected future sales of the EZ-Code between 400 and 500 annually, irrespective of any sales to Wal-Mart; (iv) Gravelle would be granted a right of first refusal to supply parts for the EZ-Code; (v) Gravelle could continue selling the CP4500 in its original, unmodified form; (vi) Gravelle would not be required to sign a non-competition agreement without compensation; and (vii) Kaba would be purchasing the CP4500, the CP4500 source code, and the modifications to the CP4500 source code, but not the development of entirely new software to mimic the performance of Kaba’s UltraCode machine. (hereafter, collectively, the "2006 Representations"). (Id. ¶ 15)

c) The 2006 Agreement

[9].
Following the parties’ discussions, on or about November 10, 2006, Gravelle and Kaba entered into a written agreement entitled "Software Purchase and Sale Agreement" (hereafter, the "Agreement"). (Id. ¶ 17) Under the Agreement, Kaba purchased the rights to Gravelle’s proprietary software application and source code (defined in the Agreement as the "Software" and the "Technology"), and Kaba also purchased Gravelle’s services in making certain modifications to the Software and Technology to fit Kaba’s purposes. (Id. 19) The purchase price for the Software and Technology and for Gravelle’s assistance in making modifications to them was $20,000, plus a limited fixed commission fee per unit sold according to Exhibit 2 to the Agreement (Agreement, § 3; Am. Claim ¶ 18)
[10].
The Agreement included a limited, nonexclusive license in favor of Gravelle "to use the Software and Technology solely for the purpose of continuing to manufacture and sell, in their current forms and without further modification, the CodePro 4500 Deluxe and CodePro 4500 Professional models currently being manufactured and offered for sale by Seller" until no later than July 15, 2007, after which date Gravelle would not be allowed to manufacture or sell any products using the Software and Technology without Kaba’s prior written consent. (Agreement, § 12)
[11].
The Agreement did not include a right of first refusal in favor of Gravelle to supply parts to Kaba for the EZ-Code, and it did not address any additional projects to be jointly developed by the parties. The Agreement did not mention any existing or potential agreements between Kaba and Wal-Mart. The Agreement did not include any requirement to sell any minimum number of machines per year or pay Gravelle any minimum commission fees per year. Thus, none of Gravelle’s alleged 2006 Representations were included in the Agreement.
[12].
Finally, the Agreement contained an "entire agreement*’ clause, which provided:

This Agreement and the Assignments and Noncompetition Agreement executed simultaneously herewith constitute the entire agreement and understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, whether oral or written.

(Agreement, § 13.2)

d) Dispute Over The Agreement

[13].
Following the execution of the Agreement, disputes arose between Kaba and Gravelle over their respective obligations under the Agreement. (Am. Claim ¶¶ 26-30) According to Gravelle, the modifications to the Software and Technology necessary to fit Kaba’s purposes were more extensive than Gravelle had expected, and the EZ-Code machine did not get marketed or sold as quickly as Gravelle had anticipated. (Id. ¶¶ 26-32) Gravelle alleges that, through his legal counsel, he "put Kaba on notice that the project could not continue until a new mutually beneficial agreement was made," (Id. ¶ 40)

e) The 2008 Addendum

[14].
On April 22, 2008, after a month of negotiations, the parties entered into a second written agreement entitled "Addendum to an Agreement dated November 10, 2011" (hereafter, the "Addendum"). (Id. ¶¶ 40-41) Gravelle was represented by counsel in the negotiations leading up to the Addendum, but his counsel did not review the final version and was not present when Gravelle executed the agreement (Id. ¶¶ 40, 45)
[15].
Gravelle alleges that during the negotiation of the Addendum, "Murray promised Gravelle that Kaba would buy all circuit boards for the EZ-Code machines from Gravelle provided he was in a position to supply them" (hereafter, the "2008 Representation"). (Id. ¶ 44) However, no such promise appears anywhere in the Addendum.
[16].
The Addendum modified certain terms of the Agreement, including the following: (1) a $9,000 increase in the total purchase price paid to Gravelle, (2) a $60,000 advance on commission fees paid to Gravelle, and (3) Kaba’s agreement to purchase 100 circuit boards from Gravelle if Gravelle met certain delivery conditions. (Attach. B. ¶¶ 3, 4, 6; Am. Claim ¶ 48)
[17].
The Addendum also provided that all terms of the Agreement that did not conflict with the Addendum would remain in full force and effect. (Addendum, § 11)
[18].
Finally, the Addendum included the following mutual general release:

Subject to all of the foregoing, each party releases the other and their respective affiliates, parent companies, employees and agents, successors, and assigns, from any past, present and future claims, demands, obligations, losses, costs, expenses, cause of action, and liabilities, including but not limited to attorney’s fees whether known or unknown, that either party has, had, or claims to have, or in the future may have arising from any alleged breach or violation of the Agreements that occurred prior to the date of this Addendum.

(the "Release"). (Addendum, § 14; Am. Claim ¶ 48) The term "Agreements," as used in the Release, is defined in the Addendum to include the Agreement. (Addendum, p. 1)

f) Gravelle’s Claims

[19].
Gravelle sued Kaba in Ontario in September 2010 and commenced this arbitration in March 2011. By stipulation, Gravelle ultimately dismissed his Ontario lawsuit and instead filed the Amended Claim, which is the subject of Respondents’ Motion. Most of the allegedly wrongful conduct alleged in Gravelle’s Amended Claim took place before the parties’ execution of the Addendum.

(i) Misrepres entation

[20].
In his Amended Claim, Gravelle asserts a tort claim for "misrepresentation" or fraud based on the 2006 Representations and the 2008 Representation. (Id. ¶¶ 56-57) Gravelle claims that these misrepresentations caused him to suffer $2 million in damages. (Id. ¶ 60) Additionally, Gravelle seeks to rescind the Agreement and the Addendum, and seeks disgorgement of any profits Kaba received relating to the Software and Technology. (Id. ¶ 61)

(ii) Breach of Contract

[21].
Gravelle also asserts a claim for breach of contract, purportedly based on the Agreement, the Addendum, and the additional alleged oral agreements consisting of the 2006 Representations and 2008 Representation. (Id. ¶¶ 63-64) The asserted breaches of each agreement are as follows:

Agreement : Gravelle alleges that Kaba:

(1) failed to sell at least 500 machines each year and, therefore, failed to pay commission fees to Gravelle for those sales; and

(2) failed to pay him $50 per hour for additional assistance allegedly outside the scope of the. agreed modifications to develop the EZ-Code source code. (Id. ¶¶ 66, 70)

Addendum : Gravelle alleges that Kaba failed to purchase any circuit boards from Gravelle following the execution of the 2008 Addendum. (Id. ¶¶ 49-52)

2006 Representations : Gravelle alleges that Kaba breached the 2006 Representations by:

(1) failing to sell at least 500 EZ-Code machines per year, and failing to pay Gravelle commission fees for those anticipated sales (Id. ¶¶ 65, 66 & 69);

(2) failing to purchase circuit boards under a right of first refusal, which Murray allegedly promised that Kaba would grant Gravelle (Id. ¶ 67);

(3) failing to enter into a future agreement with Wal-Mart to distribute a joint key reader and key cutting machine and, therefore, failing to pay Gravelle commission fees for those anticipated sales (Id. ¶ 68); and

(4) failing to enter into future projects with Gravelle. (Id. ¶ 71)

2008 Representation : Gravelle alleges that Kaba breached the 2008 Representation by failing to agree to buy all circuit boards for the EZ-Code machines from Gravelle. (Id. ¶ 67)

(iii) Violation of the North Carolina Unfair and Deceptive Trade Practices Act

[22].
Gravelle also asserts a statutory claim under the UDTPA based on the alleged 2006 Representations and the alleged 2008 Representation. (Id. ¶¶ 73-75) Gravelle seeks actual and treble damages under the UDTPA. (Id. ¶¶ 76-78)

(iv) Punitive Damages

[23].
In fete alternative to the claim for treble damages under the UDTPA, Gravelle seeks to recover punitive damages based on Respondents’ allegedly tortious conduct.

2. Respondents' Partial Motion to Dismiss

[24].
Respondents’ Motion seeks dismissal of the Amended Claim on five distinct grounds, as follows:

1) Claimant’s claims based on Respondents’ alleged acts or omissions committed prior to April 22, 2008 are barred by the release contained in the Addendum (Respondents’ Motion, pp. 12-13; Addendum, § 14);

2) Claimant’s contract claims based on the 2006 Representations and the 2008 Representation are barred by the parol evidence rule (Respondents’ Motion, pp. 3-15);

3) Claimant’s claims for misrepresentation and violation of UDPTA are barred by the express terms of the Agreement and the Addendum (Respondents’ Motion, pp. 15-16);

4) Claimant’s allegations of wrongdoing based on the 2006 Representations and the 2008 Representation fail to state claims for fraud or misrepresentation (Respondents’ Motion, p. 17); and

5) Claimant’ s claims for violation of UDPTA and for punitive damages fail because the misrepresentation claim fails (Respondents’ Motion, p. 18).

3. Discussion

[25].
The question for decision is whether the allegations of the Amended Claim, treated as true for the purposes of this Partial Final Award, are sufficient to set forth claims for misrepresentation (fraud), breach of contract, violation of the North Carolina Unfair and Deceptive Trade Practices Act, and for punitive damages.

(i) Introduction

[26].
The heart of Claimant’s grievance is that the written Agreement and Addendum do not contain certain oral representations (the 2006 Representations and 2008 Representation) that Claimant alleges were made to him by Respondents before each of the written agreements were executed by the parties. Claimant does not allege that he cannot read, nor does he allege any other incapacity to enter into contracts. Claimant presumably reviewed the Agreement and the Addendum before he executed them, so he knew or should have known that the alleged 2006 Representations and the alleged 2008 Representation were not included in those written agreements. Notwithstanding that knowledge, Claimant went ahead and executed the Agreement and the Addendum.
[27].
Moreover, the Agreement clearly stated that the Agreement constituted "the entire agreement and understanding of the parties" and superceded "all prior agreements and understandings, whether oral or written." (Agreement, ¶ 13.2) This provision applies to both the Agreement and the Addendum, because the Addendum specifically stated that all provisions of the Agreement that did not conflict with the Addendum would remain in full force and effect (Addendum, § 11), and the "Entire Agreement" clause in paragraph 13.2 of the Agreement does not conflict with the Addendum. Thus, the Agreement, as modified by the Addendum, constituted the entire agreement between Claimant and Respondent Kaba.

(ii) Parol Evidence Rule

[28].
The parol evidence rule, which is a rule of substantive law in North Carolina, "excludes prior or contemporaneous oral arguments which are inconsistent with a written contract if the written contract contains the complete agreement of the parties." Phelps-Dickson Builders, LLC v. Amerimann Partners, 617 S.E.2d 664, 670 (N.C.App. 2005). As the Court of Appeals stated in Drake v. Hance, 673 S.E.2d 411, 413 (N.C. App. 2009), "[t]he parol evidence rule prohibits the admission of parol evidence to vary, add to, or contradict the terms of an integrated written contract" (Emphasis added) Here, the Agreement and the Addendum are integrated written contracts, the alleged 2006 Representations are inconsistent with the Agreement, and the alleged 2008 Representation is inconsistent with the Addendum. Accordingly, the parol evidence rule bars Claimant’s breach of contract claims to the extent that they are based on the 2006 Representations and the 2008 Representations, because those alleged oral promises were not memorialized in the Agreement or the Addendum.

(iii) Misrepresentation (Fraud)

[29].
The essential elements of a claim for fraud are "(1) false representation or concealment of a past or existing material fact, (2) reasonably calculated to deceive, (3) made with intent to deceive, (4) which does in fact deceive, (5) resulting in damage to the injured party." Ragsdale v. Kennedy, 209 S.E.2d 494, 500 (N.C. 1974).
[30].
Here, Claimant’s Amended Claim fails to state a claim for fraud because (i) the 2006 Representations are not misrepresentations of past or existing fact but instead are alleged promises of future benefit; and (ii) the 2006 Representations and 2008 Representation are directly contradicted by the written Agreement and Addendum, and therefore Claimant could not reasonably have been deceived by the 2006 Representations and/or the 2008 Representation.

(iv) Unfair and Deceptive Trade Practices

[31].
To state a claim for violation of the North Carolina Unfair and Deceptive Trade Practices Act ("UDPTA"), Claimant must allege (1) an unfair act or practice, (2) in or affecting commerce, and (3) proximately causing actual injury to the plaintiff. Walker v. Fleetwood Homes of NC, Inc., 362 N.C. 63, 72 (2007). An act or practice is "unfair" within the meaning of UDPTA "when it offends established public policy as well as when the practice is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers." Id. An act or practice is "deceptive" under UDPTA if it has "the capacity or tendency to deceive." Id. Whether an act or practice is "unfair" or "deceptive" within the meaning of UDPTA is a question of law. Marshall v. Miller, 276 S.E.2d 397 (N.C. 1981). A mere breach of contract, even if intentional, is not sufficiently unfair or deceptive to constitute a violation of UDPTA; rather, North Carolina law requires a showing of "substantial aggravating circumstances" to state a claim under UDPTA. Branch Banking and Trust Co. v. Thompson, 421 S.E.2d 350 (N.C. 1992).
[32].
Here, the Amended Claim fails to allege a violation of UDPTA. Claimant has not plausibly alleged that he was a victim of unfair or deceptive acts within the meaning of UDPTA.

(v) Punitive Damages

[33].
Because Claimant’s tort claims (fraud, UDPTA) fail to state claims for relief, Claimant’s punitive damages claim necessarily fails because North Carolina law does not allow the recovery of punitive damages for breach of contract. Newton v. Standard Fire Ins. Co., 229 S.E.2d 297, 301 (N.C. 1976).

(vi) Release

[34].
Claimant essentially admits that tire parties entered into the Addendum in order to resolve disputes that had arisen concerning the parties’ performance of their respective obligations under the Agreement. (Amended Claim ¶¶ 40-41) The Addendum included a release under which each party released the other from all claims "arising from any alleged breach or violation of the Agreements that occurred prior to the date of this Addendum." (Addendum, §14). The Amended Claim itself states that "Gravelle would release all disputes pre-dating the signing of the 2008 Addendum (Article 14)." (Amended Claim, ¶ 48i) (Emphasis added)
[35].
Under North Carolina law, a general release of all claims "arising out of’ a contract includes related claims sounding in tort. Broussard v. Meineke Muffler Shops. Inc., 958 F. Supp. 1087 (W.D. N.C. 1997); rev’d on other grounds, 155 F.3d 331 (4th Cir. 1998). Clearly, the tort claims asserted in the Amended Claim all arise out of Claimant’s contractual relationship with Respondent Kaba Ilco Corp, As such, all of Claimant’s claims that are based on alleged conduct that occurred prior to the date of the Addendum (April 22, 2008) were released in the Addendum.

b) Conclusion

[36].
For the reasons stated above, Claimant’s claims for (i) breach of contract as to the Agreement, (ii) misrepresentation or fraud, (iii) violation of UDTPA and (iv) punitive damages must be dismissed. Only Claimant’s claim for breach of contract as to the Addendum remains to be determined.

B. Claimant’s Motion to Amend Claim

[37].
Section R-6 of the Commercial Arbitration Rules of the American Arbitrator’s Association deals with the amendment of claims and provides in pertinent part that: "After the arbitrator is appointed, however, no new or different claim may be submitted except with the arbitrator’s consent."
[38].
Claimant’s motion to amend is denied, because it is futile and because it comes too late. This case has been pending for nearly two years, and Claimant’s proposed amendment does not include any material factual allegations that would change the decision regarding. Respondents’ Motion.

IT IS THEREFORE ORDERED AND AWARDED, as follows:

[39].
1. Respondents’ Partial Motion to Dismiss Claimant’s Amended Claim is granted in all respects, and all of Claimant’s claims are hereby dismissed, except for Claimant’s claim for breach of the Addendum;

2. Claimant’s Motion to Amend Claim is hereby denied; and

3. The ICDR is requested to arrange a pre-hearing conference with counsel for the parties and the undersigned, to schedule the final hearing and discuss any other matters pertaining to this case.

[40].
I hereby certify that, for the purposes of Article 1 of the New York Convention of 1958, on the Recognition and Enforcement of Foreign Arbitral Awards, this Partial Final Award was made in Charlotte, NC, U.S.A.
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