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August 15, 1995

AT&T CORP., a New York corporation, Plaintiff,
VISION ONE SECURITY SYSTEMS, a California general partnership; WILLIAM F. WOODS, an individual; DANIEL M. ROHRBASSEN, an individual; and PAUL SIEGEL, an individual, Defendants.

The opinion of the court was delivered by: GONZALEZ

 Plaintiff AT&T Corporation's motion to dismiss or stay counterclaims pending arbitration and defendants Vision One, William F. Woods, Daniel M. Rohrbassen, and Paul Siegel's motion for trial preference came on regularly for hearing on August 14, 1995 before the Honorable Irma E. Gonzalez. James J. Mittermiller of Sheppard, Mullin, Richter & Hampton appeared on behalf of plaintiff; Matthew V. Herron of Meisenheimer & Herron appeared on behalf of defendants.


 On April 28, 1995, plaintiff AT&T Corporation ("AT&T") filed a complaint for damages and injunctive relief against defendants Vision One Security Systems, a California general partnership, William F. Woods, Daniel M. Rohrbassen, and Paul Siegel (collectively referred to as "defendants" or "Vision One"). AT&T claims that Vision One's license to use AT&T's trade name and trademarks has been terminated; nonetheless, Vision One continues to hold itself out as an authorized AT&T dealer and use the name and marks in its advertising, promotion, and marketing. AT&T asserts five claims for relief: (1) violation of the Lanham Act by use of false designation of origin; (2) trademark infringement in violation of 15 U.S.C. § 1114(1); (3) trade name infringement; (4) unfair business practices in violation of Cal. Bus. & Prof. Code § 17200; and (5) breach of contract.

 On May 30, 1995, Vision One answered AT&T's complaint and counterclaimed against it. Vision One states four claims against AT&T: (1) interference with contract; (2) interference with prospective economic advantage; (3) intentional misrepresentation; and (4) misrepresentation in offer and sale of franchise.

 On June 16, 1995, the Court granted AT&T's motion for a preliminary injunction and enjoined Vision One from using in any manner the AT&T trade name and trademark. Defendants have appealed from that order.


 Before the court are two motions. Plaintiff AT&T moves to dismiss or stay defendants' counterclaims pending arbitration, and defendants move for trial preference. The Court will address plaintiff's motion first.


 Relying on the dispute resolution provisions of the Dealer Agreement between Alliance Systems Corporation ("Alliance") and Vision One, AT&T seeks dismissal or stay of Vision One's counterclaims pending arbitration. If the arbitration provision is binding on disputes between AT&T and Vision One, dismissal or stay of some of AT&T's claims may also be appropriate.

 Vision One opposes any stay or dismissal of its counterclaims; it argues that the arbitration provision may not be enforced by AT&T, that AT&T has waived arbitration, that Vision One's counterclaims are not subject to arbitration, and that the Dealer Agreement is illegal and therefore the arbitration clause is unenforceable.

 A. The Dealer Agreement

 The Dealer Agreement contains the following provisions regarding dispute resolution:

The parties shall follow these dispute resolution processes in connection with all disputes, controversies or claims, whether based on contract, tort, statute, fraud, misrepresentation or any other legal theory (hereinafter collectively "Disputes"), except as otherwise noted, arising out of or relating to the Products furnished pursuant to this Agreement or acts or omissions of Distributor or AT&T under this Agreement. . . .

 (Dealer Agreement at P 25.) The section requires (1) that the parties, including AT&T if applicable, attempt to settle the disputes through negotiation; (2) if that fails, the parties shall engage in mediation in New Jersey under the Commercial Mediation Rules of the American Arbitration Association ("AAA"); and (3) if that fails, and the amount in controversy does not exceed $ 1 million, *fn1" the dispute "shall be settled by binding arbitration in New Jersey in accordance with the then current Commercial Arbitration Rules" of the AAA. Id. at P 25.1-25.2. In the event of arbitration, the agreement specifically provides that AT&T shall be a party. Id. at P 25.2. And the Agreement provides that dispute resolution process is to be governed by the Federal Arbitration Act ("FAA"), 9 U.S.C. §§ 1-14.

 The Dispute Resolution section expressly excepts "disputes relating to Reseller's compliance with the Trademarks Section of this Agreement." (Dealer Agreement at P 25.3.) Regarding its trademark, AT&T expressly reserves the right "to seek injunctive or other judicial relief in a court of competent jurisdiction." Id.

 Because the Agreement specifically provides that the FAA governs the agreement, any "questions of arbitrability must be addressed with a healthy regard for the federal policy favoring arbitration." Moses H. Cone Hospital v. Mercury Construction Corp., 460 U.S. 1, 24, 103 S. Ct. 927, 74 L. Ed. 2d 765 (1982); see also Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 221, 84 L. Ed. 2d 158, 105 S. Ct. 1238 (1985) (Courts must "rigorously enforce agreements to arbitrate.") Section 2 provides that a written 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. The Supreme Court has interpreted the FAA as clear ...

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