Weiner v. Tootsie Roll Industires, Inc.

                                                                        [DO NOT PUBLISH]

                        IN THE UNITED STATES COURT OF APPEALS
                                                                                FILED
                               FOR THE ELEVENTH CIRCUIT COURT OF APPEALS
                                                        U.S.
                                ________________________ ELEVENTH CIRCUIT
                                                                             FEB 2, 2011
                                       No. 10-12989                          JOHN LEY
                                   Non-Argument Calendar                       CLERK
                                 ________________________

                             D.C. Docket No. 1:09-cv-03673-TWT

BRUCE WEINER,


                                                     lllllllllllllllllllllPlaintiff - Appellant,


                                            versus


TOOTSIE ROLL INDUSTRIES, INC.,

lllllllllllllllllllll                                               Defendant - Appellee.

                                ________________________

                          Appeal from the United States District Court
                             for the Northern District of Georgia
                                ________________________

                                      (February 2, 2011)

Before BARKETT, MARCUS and PRYOR, Circuit Judges.

PER CURIAM:
      Bruce Weiner appeals the denial of his motion to remand and the order

compelling him to arbitrate his complaint against Tootsie Roll Industries, Inc.

Weiner filed a complaint in a Georgia court for a declaratory judgment that he was

not bound by a covenant not to compete in a contract he executed with Tootsie

Roll, and Tootsie Roll removed the action to the district court. Weiner argues that

his complaint does not satisfy the amount in controversy required for diversity

jurisdiction and, alternatively, he is not contractually bound to arbitrate his dispute

with Tootsie Roll. We affirm.

                                I. BACKGROUND

      Weiner, a resident of Georgia, owned interests in four companies. He was

the co-founder and owner of 31 percent of Concord Confections, Inc., a privately

owned business that manufactured and distributed Dubble Bubble gum and other

confectionary products. Weiner also owned Alpharetta Confections, Inc., and he

owned indirectly 31 percent of Concord Wax, LLC, and 30 percent of Terra Rouge

Estates, Inc.

      Tootsie Roll purchased Weiner’s interest in the four companies. In August

2004, Tootsie Roll agreed to pay $217,210,500 for the assets and certain liabilities

of “Sellers” Concord Confections, Alpharetta Confections, Concord Wax, and

Terra Rouge Estates. The sellers and their stockholders—who consisted of

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Weiner, two other persons, and an assortment of holding companies and trusts

—agreed not to compete against or solicit the employees or former customers of

Tootsie Roll for 10 years after the “Closing Date.” Tootsie Roll purchased all the

“right, title and interest in and to all of the assets of Sellers,” which included their

“Intellectual Property” and “goodwill associated therewith,” and the agreement

stated that the purchase price would be allocated among the assets “for all

purposes . . . in accordance with the allocation schedule.” Weiner signed the

agreement on behalf of sellers Concord Confection, Terra Rouge Estates,

Alpharetta Confections, and Concord Wax. Weiner also signed the agreement as a

“Direct Stockholder” and as “President and Secretary” of two “Holding Company

Stockholders,” and as a trustee for two “Trust Stockholders.”

      The parties later amended the purchase agreement, and the amended

agreement contained a superceding purchase price allocation schedule. The

schedule allocated the purchase price among eleven items, including $27.5 million

for “Alpharetta Customer Intangibles and Goodwill” and the balance of the

purchase price remaining after payment of the other 10 items for “Concord

Goodwill and Trademarks.”

      The sellers and Tootsie Roll agreed to arbitrate “any and all disputes . . . that

relate[d] to [the] Agreement” except for “claims barred by the applicable survival

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period” and “claims for preliminary or provisional injunctive relief.” The

arbitration clause stated that the disputes would be resolved “by arbitration

administered by the American Arbitration Association (‘AAA’) in Chicago,

Illinois under the then-effective Commercial Arbitration Rules of the AAA, in

accordance with the Illinois Uniform Arbitration Act.” The clause stated that the

dispute would be submitted to a single arbitrator who would “have the authority to

award any remedy or relief that a court in the State of Illinois . . . could order or

grant, including specific performance of any obligation created under [the]

Agreement.” The agreement also contained a choice of law clause that stated the

“Agreement and all disputes, claims or controversies relating to, arising out of, or

in connection with [the] Agreement” would be “governed by, and construed in

accordance with the domestic laws of the State of Illinois without giving effect

any choice or conflict of law provision or rule . . . that would cause the application

of the laws of any jurisdiction other than the State of Illinois.”

      In November 2009, Weiner filed a complaint in a Georgia court against

Tootsie Roll. Weiner sought a declaratory judgment that the covenants in the

purchase agreement were unenforceable as unreasonable as “to the time,

geographic area, and scope of the prohibited business activity.” Weiner argued

that the arbitration clause “violat[ed] . . . Georgia law and contravene[d] Georgia’s

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strong public policy” and he did not “acknowledge his intent” to forego his

“common law right of access to the courts . . . by initialing the employment related

arbitration clauses.”

      When Tootsie Roll removed the action to the district court based on

diversity of citizenship, 28 U.S.C. § 1332, Tootsie Roll argued that the value of

the relief sought by Weiner—that is, restoring his right to compete—exceeded the

required amount in controversy in two ways. First, Weiner would receive “far in

excess of $75,000” for the “benefit that he promised to Tootsie Roll, but will not

provide” because Weiner had received “in excess of $85 million” in exchange “for

his interest” in the four companies and “for his agreement not to compete with

Tootsie Roll following the sale.” Second, Weiner would earn “much more than

$75,000” during the four years remaining under the contract based on “his

historical earnings” in 2003 of $3.4 million as the “sole shareholder and CEO of

Alpharetta Confections” and $96,000 as the “Executive Vice President for Sales &

Marketing for Concord Confections Inc.”

      After it removed the action, Tootsie Roll moved to compel Weiner to

arbitrate his complaint. Tootsie Roll argued that the “express terms of the

arbitration provision” in the purchase agreement required Weiner to submit his

complaint to arbitration. Tootsie Roll also argued that the arbitration provision

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was enforceable under federal and Illinois law, as well as Georgia law.

       The district court decided the parties’ motions based on the pleadings. The

district court denied Weiner’s motion to remand, and the district court granted the

motion of Tootsie Roll to compel arbitration.

                          II. STANDARDS OF REVIEW

       Two standards govern our review of this appeal. We review de novo the

denial of Weiner’s motion to remand and the order compelling him to arbitrate.

See Moore v. N. Am. Sports, Inc., 623 F.3d 1325, 1328 (11th Cir. 2010);

Pendergast v. Sprint Nextel Corp., 592 F.3d 1119, 1132 n.11 (11th Cir. 2010). We

review findings of jurisdictional facts for clear error. See Scarfo v. Ginsberg, 175

F.3d 957, 960 (11th Cir. 1999).

                                  III. DISCUSSION

       We divide our discussion in two parts. First, we address whether the district

court erred when it denied Weiner’s motion to remove. Second, we address

whether the district court erred when it compelled Weiner and Tootsie Roll to

arbitrate.

  A. The District Court Did Not Err when It Denied Weiner’s Motion to Remand.

       A defendant may remove an action to a district court that would have

original jurisdiction because the citizenship of the parties is diverse and the

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amount in controversy exceeds $75,000. 28 U.S.C. § 1332. The parties dispute

only whether Tootsie Roll established by a preponderance of the evidence that

Weiner’s complaint satisfied the amount in controversy requirement. See Pretka

v. Kolter City Plaza II, Inc., 608 F.3d 744, 752 (11th Cir. 2010). Because Weiner

seeks declaratory relief, the amount in controversy is the “‘monetary value of the

object of the litigation from [his] perspective.’” Fed. Mut. Ins. Co. v. McKinnon

Motors, LLC, 329 F.3d 805, 807 (11th Cir. 2003) (quoting Cohen v. Office Depot,

Inc., 204 F.3d 1069, 1077 (11th Cir. 2000)). Tootsie Roll was not “required to

prove the amount in controversy beyond all doubt or to banish all uncertainty

about it.” Pretka, 608 F.3d at 754. Instead, Tootsie Roll had only to present

“evidence combined with reasonable deductions, reasonable inferences, or other

reasonable extrapolations,” id., that the value of restoring Weiner’s right to

compete exceeded $75,000.

      The district court did not clearly err when it found that the value of the

object of Weiner’s complaint against Tootsie Roll exceeded $75,000. Although a

covenant not to compete “generally [is] not susceptible to an abstract fair market

valuation,” Better Beverages, Inc. v. United States, 619 F.2d 424, 429 (5th Cir.

1980), Tootsie Roll does not seek to “tether[] [value] to the fact of the

transaction,” id. at 430. In contrast to the situation in Better Beverages, where a

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taxpayer sought to assign a value to his covenant not to compete when there was

no allocation made for the components of the business he sold, Weiner and

Tootsie Roll assigned millions of dollars of value to the goodwill of the companies

transferred to Tootsie Roll, and Weiner acknowledged in paragraph 52 of his

complaint that his agreement not to compete was a component of that goodwill.

Although Weiner alleged in his complaint that the “goodwill associated with [his]

reputation is de minimis,” Weiner was compensated handsomely for the goodwill

transferred to Tootsie Roll, and even a small percentage of that total exceeds the

jurisdictional threshold. In addition, Tootsie Roll presented undisputed evidence

that Weiner collected millions of dollars in 2003 for his ownership interest in the

companies and that, in 2003 and 2004, Weiner and several high-ranking salaried

employees of Concord Confections and Alpharetta Confections earned more than

the jurisdictional threshold. The district court did not clearly err when it found

that Tootsie Roll established by a preponderance of the evidence that the value of

the relief sought by Weiner exceeds the required amount in controversy.

   B. The District Court Did Not Err by Granting the Motion of Tootsie Roll to
                              Compel Arbitration.

      “The ‘validity of an arbitration agreement is generally governed by the

Federal Arbitration Act.’” Lambert v. Austin Ind., 544 F.3d 1192, 1195 (11th Cir.



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2008) (quoting Caley v. Gulfstream Aerospace Corp., 428 F.3d 1359, 1367 (11th

Cir. 2005)). The Act promotes enforcement of written agreements to arbitrate, see

9 U.S.C. § 2, “in the manner provided for in [the parties’] agreement,” id. § 4. As

a result, contracting “parties who do agree to arbitrate” are free to “exclud[e]

certain claims from the scope of their arbitration agreement.” Volt Info. Scis., Inc.

v. Bd. of Trs. of Leland Stanford Junior Univ., 489 U.S. 468, 478, 109 S. Ct. 1248,

1255 (1989). Weiner and Tootsie Roll agreed that, “except for claims barred by

the applicable survival period in [section] 8(a)” and “claims for preliminary or

provisional injunctive relief . . ., any and all disputes . . . that relate[d] to [the]

Agreement” would be “determined solely and exclusively by arbitration.”

       Weiner argues that a provision in the covenant not to compete allows him to

litigate its validity in “a court of competent jurisdiction,” and in turn, trumps the

agreement to arbitrate, but we disagree. Because the Arbitration Act “creates a

presumption in favor of arbitrability,” the “parties must clearly express their intent

to exclude categories of claims from their arbitration agreement.” Paladino v.

Avnet Computer Techs., Inc., 134 F.3d 1054, 1057 (11th Cir. 1998). The

provision of the covenant not to compete cited by Weiner does not exclude from

arbitration an action to declare the covenant wholly unenforceable. The provision

instead addresses relief entered by a court of competent jurisdiction to enforce the

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covenant in whole or in part. The agreement provides that the covenant is

enforceable “to the fullest extent permissible” and, if any portion is modified or

severed, the revised or remaining portions are enforceable:

      The Parties hereby agree and acknowledge that the duration, scope and
      geographic area applicable to each of the restrictions set forth above are
      fair, reasonable and necessary. The consideration provided for in this
      Agreement is sufficient and adequate to compensate each Seller and
      each Stockholder . . . for agreeing to each of the restrictions contained
      above. However, in the event that any of [sic] portion of the restrictions
      set forth above shall be determined by any court of competent
      jurisdiction to be unenforceable, including by reason of their being
      extended over too great a period of time or too large a geographic area
      or over too great a range of activities, it shall be interpreted to extend
      only over the maximum period of time, geographic area, or range of
      activities as to which it may by [sic] be enforceable. Each provision and
      part of a provision herein shall be deemed a separate and severable
      covenant. It is the desire and intent of the Parties that the provisions of
      this Agreement be enforced to the fullest extent permissible under the
      laws and public policies applied in each jurisdiction in which such
      enforcement is sought. Accordingly, a court of competent jurisdiction
      is directed to modify any provision to the extent necessary to render
      such provision enforceable and if such cannot lawfully be done, then to
      sever any such portion of a provision, but only such portion of a
      provision necessary to cause the remaining provisions or portions of
      provisions to be enforceable. If the final judgment of a court of
      competent jurisdiction declares that any term or provision of this §6(d)
      is invalid or unenforceable, the Parties agree that the court making the
      determination of invalidity or unenforceability shall have the power to
      reduce the scope, duration or area of the term or provision, to delete
      specific words or phrases, or to replace any invalid or unenforceable
      term or provision with a term or provision that is valid and enforcement
      and that comes closest to expressing the intention of the invalid or
      unenforceable term or provision, and this Agreement shall be
      enforceable as so modified after the expiration of the time within which

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      the judgment may be appealed.

      The district court did not err by compelling Weiner to arbitrate his

complaint. The Arbitration Act requires that courts “enforce privately negotiated

agreements to arbitrate, like other contracts, in accordance with their terms,” Volt,

489 U.S. at 478, 109 S. Ct. 1255, and Illinois caselaw likewise provides that “‘the

rights of parties to a contract are limited by the terms expressed in the contract,’”

Berryman Transfer and Storage Co., Inc. v. New Prime, Inc., 345 Ill. App. 3d 859,

863, 802 N.E.2d 1285, 1288 (2004) (quoting Jewelers Mut. Ins. Co. v. Firstar

Bank Ill., 341 Ill. App. 3d 14, 26, 792 N.E.2d 1, 11 (2003)). Although the

arbitration clause states that Weiner and Tootsie Roll will submit to arbitration

“any and all disputes” subject to two stated exceptions, Weiner’s interpretation

would create a third exception for all disputes involving the covenant not to

compete. Weiner’s argument is inconsistent with and would invalidate the

carefully drafted language of the agreement. Courts are bound to “rigorously

enforce agreements to arbitrate” consistent with their stated terms. Dean Witter

Reynolds, Inc. v. Byrd, 470 U.S. 213, 221, 105 S. Ct. 1238, 1242 (1985). The

agreement obliges Weiner to submit his action to arbitration.

      Weiner also argues that the covenant not to compete is unenforceable

because Georgia law provides that arbitration is not required in “[a]ny contract

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relating to terms and conditions of employment unless the clause agreeing to

arbitrate is initialed by all signatories at the time of the execution of the

agreement,” Ga. Code Ann. § 9-9-2(c)(9), but this argument too fails. We need

not address whether Georgia law applies to the action because section 9-9-2 does

not govern the agreement between Weiner and Tootsie Roll. See Joja Partners,

LLC v. Abrams Props., Inc., 262 Ga. App. 209, 212, 585 S.E.2d 168, 171–72

(2003) (discussing the narrow interpretation of section 9-9-2(c)(9)). Weiner and

Tootsie Roll do not share an employer-employee relationship.

                                 IV. CONCLUSION

      We AFFIRM the denial of Weiner’s motion to remand and the order

compelling him to arbitrate his complaint.




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