termination of employment contract “does not necessarily terminate a provision for arbitration or other agreed procedure for the resolution of disputes”
How later courts described this case
- termination of employment contract “does not necessarily terminate a provision for arbitration or other agreed procedure for the resolution of disputes”
- arbitration clause survives completion of work under construction contract
- arbitration clause in building contract not affected by a party’s repudiation or total breach of contract
Written by the judges who cited it.
The opinion
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NORTH CAROLINA
WESTERN DIVISION
No. 5:25-CV-112-M
JEREMY GERALD, )
Plaintiff,
) MEMORANDUM AND
v. ) RECOMMENDATION
SHIPT, et al.,
Defendants.
This matter comes before the court on Defendant Shipt, Inc.’s (“Shipt”) motion to compel
arbitration and to stay proceedings. [DE-9]. Plaintiff purportedly indicated consent to the motion
prior to its filing, [DE-10-2], but objected to the motion after it was filed, [DE-14]. Shipt filed a
reply in support of the motion. [DE-16]. This non-dispositive motion! is ripe for decision and is
referred to the undersigned for a memorandum and recommendation pursuant to 28 U.S.C. §
636(b)(1)(B). See May 2, 2025 Text Order. For the reasons stated below, it is recommended that
the motion be allowed.
Plaintiff filed this action in state court against Shipt and two other defendants, [DE-1-1],
and Shipt removed the matter by invoking the federal court’s diversity jurisdiction, pursuant to 28
U.S.C. §§ 1332(a) and 1441(b). [DE-1]. Shipt seeks to compel arbitration and stay this matter as
to Shipt, pursuant to an arbitration provision in a contract between the parties invoking the Federal
Arbitration Act, 9 U.S.C. § 1, et seg. (“FAA”), [DE-10-1]. Plaintiff argues that any agreement to
arbitrate was voided pursuant to the contract’s termination clause. [DE-14].
' See Scales v. SSC Winston-Salem Operating, Co., LLC, No. 1:17-CV-539, 2017 WL 4467278, at *1 (M.D.N.C. Oct.
5, 2017) (collecting cases finding that motions to compel arbitration and to stay proceedings are non-dispositive
pretrial motions under 28 U.S.C. § 636(b)(1)).
The FAA provides that an agreement to arbitrate “shall be valid, irrevocable, and
enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.”
9 U.S.C. § 2; Newman v. First Montauk Fin. Corp., No. 7:08-CV-116-D, 2010 WL 2933281, at
*4 (E.D.N.C. July 23, 2010). “By enacting the FAA, Congress created a ‘presumption’ in favor
‘of arbitrability,’” and “a court must resolve any doubts in favor of arbitration and compel
arbitration ‘unless it may be said with positive assurance that the arbitration clause is not
susceptible of an interpretation that covers the asserted dispute.’”” Newman, 2010 WL 2933281,
at *5 (quoting AT & T Techs., Inc. v. Commc’ns Workers of Am., 475 U.S. 643 (1986)). However,
the presumption of arbitrability only applies where there is a validly formed and enforceable
arbitration agreement, Granite Rock Co. v. Int’l Bhd. of Teamsters, 561 U.S. 287, 301 (2010), and
the court looks to state law contract principles to determine whether a valid and enforceable
agreement exists, Scales, 2017 WL 4467278, at *2 (citation omitted). Under North Carolina law,
“a valid contract requires (1) assent; (2) mutuality of obligation; and (3) definite terms.” Brown v.
Fam. Dollar Stores of N.C., Inc., No. 1:21-CV-977, 2022 WL 3576972, at *2 (M.D.N.C. Aug. 19,
2022) (quoting Charlotte Motor Speedway, LLC v. Cnty. of Cabarrus, 748 S.E.2d 171, 176 (N.C.
Ct. App. 2013)).
Plaintiff's complaint alleges that Shipt operates an “app” that allows the public to order
groceries and other items and have them delivered; Plaintiff joined the platform in 2023, to be a
“driver/shopper” and earned significant income over the course of several months; in late 2023,
Plaintiff broke his phone, losing access to his phone number and email address and was unable to
download the app on his new phone; Plaintiff contacted Shipt to attempt to resolve the issue but it
“refused to permit access to the platform from a different device”; and Plaintiff gave up his efforts
to access his account for a time but tried again in September 2024 to no avail. [DE-1-1] at 5.
Plaintiff does not specifically identify a cause of action, but it appears that he is asserting a breach
of contract claim against Shipt.
Here, Shipt has presented an Independent Contractor Agreement (“ICA”) between the
parties dated January 24, 2023, that contains a mandatory arbitration provision. ICA [DE-10-1] at
10913. Plaintiff does not challenge the validity of the ICA, but rather argues that he has not had
access to the platform since 2023, and “any binding arbitration agreement agreed to was made
void by the passage of 75 consecutive days an [sic] no Delivery Services were provided by the
Plaintiff,” pursuant to the agreement’s Termination clause. [DE-14] at 1 (citing ICA § 14.c.iv).
Shipt contends Plaintiff contractually agreed to submit claims against Shipt to arbitration, Plaintiff
consented to Shipt’s motion, and the arbitration clause survives any purported termination of the
ICA. [DE-16].
Under the terms of the ICA, the parties agreed to arbitrate “any and all claims arising out
of or relating to” the ICA, including “the deactivation of [Plaintiff's] Shopper ID or [Plaintiff's]
access to the Shipt Technology Services, termination of this Agreement, . . . and all . . . state legal
claims... (for example, tort or contract claims) arising out of or relating to [Plaintiff s] relationship
or the termination of that relationship with SHIPT.” ICA [DE-10-1] J 13.a. Plaintiff's breach of
contract claim based on his inability to access the Shipt platform falls squarely within the scope of
claims the parties agreed to arbitrate under the ICA. While Plaintiff argues that the ICA terminated
and voided the arbitration provision, [DE-14] at 1, the ICA’s termination provision expressly
provides that the arbitration provision survives termination of the ICA, see ICA [DE-10-1] § 14.d.
The Supreme Court has recognized that “provisions relating to remedies and dispute resolution—
for example, an arbitration provision—may in some cases survive [the expiration of an agreement]
in order to enforce duties arising under the contract.” Litton Fin. Printing Div., a Div. of Litton
Bus. Sys., Inc. v. N.L.R.B., 501 U.S. 190, 208 & n.3 (1991) (citing West Virginia ex rel. Ranger
Fuel Corp. v. Lilly, 165 W.Va. 98, 100-01, 267 S.E.2d 435, 437-38 (1980) (duty to arbitrate
survives termination of lease); Warren Brothers Co. v. Cardi Corp., 471 F.2d 1304 (1st Cir. 1973)
(arbitration clause survives completion of work under construction contract); Mendez v. Trs. of
Boston Univ., 362 Mass. 353, 356, 285 N.E.2d 446, 448 (1972) (termination of employment
contract “does not necessarily terminate a provision for arbitration or other agreed procedure for
the resolution of disputes”); Batter Bldg. Materials Co. v. Kirschner, 142 Conn. 1, 10-11, 110
A.2d 464, 469-470 (1954) (arbitration clause in building contract not affected by a party’s
repudiation or total breach of contract)). Thus, Plaintiff's sole argument against enforcement of
the arbitration provision—that termination of the ICA voided the arbitration provision—lacks
merit.
Accordingly, the court finds that a valid agreement to arbitrate exists between the Plaintiff
and Shipt with respect to the claims asserted against Shipt in this matter, and it is recommended
that Shipt’s motion to compel arbitration of the claims against it be allowed and that this matter be
stayed as to Shipt, pursuant to 9 U.S.C. § 3, pending arbitration of the claims against Shipt.
IT IS DIRECTED that a copy of this Memorandum and Recommendation be served on
each of the parties or, if represented, their counsel. Each party shall have until June 17, 2025 to
file written objections to the Memorandum and Recommendation. The presiding district judge
must conduct his or her own review (that is, make a de novo determination) of those portions of
the Memorandum and Recommendation to which objection is properly made and may accept,
reject, or modify the determinations in the Memorandum and Recommendation; receive further
evidence; or return the matter to the magistrate judge with instructions. See, e.g., 28 U.S.C. §
636(b)(1); Fed. R. Civ. P. 72(b)(3); Local Civ. R. 1.1 (permitting modification of deadlines
specified in local rules), 72.4(b), E.D.N.C. Any response to objections shall be filed by within 14
days of the filing of the objections.
If a party does not file written objections to the Memorandum and Recommendation
by the foregoing deadline, the party will be giving up the right to review of the Memorandum
and Recommendation by the presiding district judge as described above, and the presiding
district judge may enter an order or judgment based on the Memorandum and
Recommendation without such review. In addition, the party’s failure to file written
objections by the foregoing deadline will bar the party from appealing to the Court of
Appeals from an order or judgment of the presiding district judge based on the
Memorandum and Recommendation. See Wright v. Collins, 766 F.2d 841, 846-47 (4th Cir.
1985).
Submitted, the 3 day of June, 2025.
United States Magistrate Judge