The opinion of the court was delivered by: Hon. Jeffrey T. Miller United States District Judge
ORDER GRANTING DEFENDANTS' MOTION TO (1) COMPEL ARBITRATION AND (2) DISMISS CASE Doc. No. 4
On July 9, 2009, Plaintiffs ValueSelling Associates, LLC ("VSA") and Sales Vision, LLC ("SVL"), filed this complaint against Defendants Kevin Temple and Enterprise Selling Group ("ESG") alleging the following causes of action: (1) misappropriation of trade secrets, (2) common law misappropriation, (3) violation of California's unfair business practices act, Cal. Bus. & Prof. Code §§ 17200-17210, (4) trademark infringement, (5) violation of the Lanham Act, (6) copyright infringement, (7) trade libel, (8) intentional interference with prospective economic advantage, (9) breach of implied covenant of good faith and fair dealing, (10) unjust enrichment, and (11) alter ego. (Doc. No. 1).
On September 3, 2009, Defendants filed a motion for an order compelling arbitration and dismissing the case, or in the alternative, staying the proceedings. (Doc. No. 4). Defendants base their motion to compel arbitration on three contracts between Plaintiffs and Defendant Temple, each containing arbitration clauses.
On September 25, 2009, Plaintiffs filed an opposition to Defendants motion to compel arbitration arguing: (1) that the contracts containing the arbitration clauses cited by Defendants do not relate to the claims being made in the complaint, and (2) the case involves a third party (Defendant ESG) who was not a party to the contracts and is therefore not subject to the arbitration provisions. (Doc. No. 6).
The court finds this matter appropriate for decision without oral argument. See CivLR 7(d)(1). For the reasons set forth below, the court GRANTS Defendant's motion to compel arbitration and dismiss the case.
Plaintiffs VSA and SVL own certain propriety and copyrighted intellectual property known as the ValueSelling Program. This program was initially created by Lloyd Sappington who formed ValueSelling Systems, Inc. (VSSI) for purposes of developing and operating a sales and delivery network for the ValueSelling Program. (Doc. No. 1, hereinafter "Compl.," ¶ 29). On January 1, 1997, VSSI and Temple formed ValueVision Associates ("VVA") which was licensed by VSSI to utilize VSSI's intellectual property, including the ValueSelling Program. (Compl. ¶¶ 33, 35).
In June 2003, Plaintiffs acquired the ValueSelling Program when it purchased VVA and other related assets, including all trademarked and copyrighted material, from VSSI, Temple, and a third entity, Dialogue Management, Inc. (Compl. ¶ 36). Plaintiffs' acquisition of VVA was governed by the "Purchase Agreement" containing an arbitration provision. (Compl. ¶ 37). The provision signed by the parties governs "[a]ny dispute, controversy, or questions arising under, out of or related to this agreement or breach thereof." (Doc. No. 4, Def. Motion Ex. A, ¶ 11.4).
On July 9, 2003, Plaintiffs and Temple entered into a consultancy agreement whereby Temple would act as a consultant for SVL with certain licensing rights to the programs and materials now owned by SVL in order to aid SVL in distributing its product. (Compl. ¶ 42). Pursuant to the agreement Temple was retained by SVL as an independent contractor for a period of three years at $200,000 per year. (Compl. ¶ 43). The "Consultancy Agreement" contained an arbitration provision stating, "[t]he parties agree, if any dispute arises concerning the interpretation and/or enforcement of the terms of this agreement, the dispute shall be resolved by binding arbitration." (Doc. No. 4, Def. Motion Ex. B, ¶ 9.4).
The relationship between Plaintiffs and Temple was ongoing until a dispute arose between the parties in July 2007. (Compl. ¶ 47). In December 2007, Plaintiffs and Temple reached a settlement to terminate their business relationship. (Compl. ¶ 48). The parties to the "Confidential Settlement Agreement" agreed to submit to arbitration, "[a]ny dispute, controversy, or question arising under, out of or relating to this Agreement or the breach thereof." (Doc. No. 4, Def. Motion Ex. C, ¶ 12)
A. Plaintiffs' Claims Are Subject to Arbitration
There is a strong public policy presumption favoring arbitrability. Moses H. Cone Memorial Hosp. v. Mercury Const. Corp., 460 U.S. 1, 24-25 (1983); see AT & T Tech., Inc. v. Comm. Workers of Am., 475 U.S. 643 (1986); United Steelworkers of Am., v. American Mfg. Co., 363 U.S. 464 (1960). In accordance with this policy, any doubts whether a dispute comes within an arbitration clause is resolved in favor of arbitration. The Supreme Court repeatedly and ardently reiterated this principal set forth in the Federal Arbitration Act ("FAA") noting that "unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute," arbitration should be compelled. Moses, supra, 460 U.S. at 24-25. "The standard for demonstrating arbitrability is not a high one; in fact, a district court has little discretion to deny an arbitration motion since the Act is phrased in mandatory terms." Republic of Nicaragua v. Standard Fruit Co., 937 F.2d 469,475 (9th Cir. 1991). The Supreme Court has emphasized that the Act "leaves no place for the exercise of discretion by a district court, but instead mandates that district courts shall direct the parties to proceed to arbitration on issues as to which an arbitration agreement has been signed." Dean Witter Reynolds, Inc., v. Bryd, 470 U.S. 213, 218 (1985); see also Howard Elec. & Mech. V. Briscoe Co., 745 F.2d 847, 849 (9th Cir. 1985). Such agreements shall be "rigorously enforce[d]." Bryd, 470 U.S. at 221. Only where there is a "definite showing" that the dispute in question is outside the arbitration clause should a court decline to compel arbitration. See VAC Service Corp. v. Service Merch. Co., Inc., 929 F. Supp 143, 145 (S.D.N.Y. 1996).
Generally, in determining whether a given claim is subject to arbitration, a court must engage in a two part inquiry, first determining the breadth of the arbitration clause (whether it is broad or narrow), and then applying the relevant scope of the provision to the asserted legal claims to determine if they require arbitration. See Simula, Inc., v. Autoliv, Inc., 175 F.3d 716, 720-726 (9th Cir. 1999). A clause providing for the arbitration of "any claim or controversy arising out of or relating to the agreement" has been held to be the paradigm of a broad clause. Collins & Aikman Products Co., v. Building Systems, Inc. 58 F.3d 16, 20 (2d Cir. 1995).The words "any disputes arising from or relating to this agreement" have been held to even include disputes not arising under the agreement, if the disputes have a "significant relationship" to the agreement. Long v. Silver, 248 F.3d 309, 316 (4th Cir. 2001). When the arbitration clause in a contract is broad, the strong presumption in favor of arbitration applies with even greater force. See Leadertex Inc., v. Morganton Dyeing and Finishing Corp., 67 F.3d 20, 27 (2d Cir. 1995).
In determining whether a claim falls within the scope of the arbitration provision, a court will examine the factual allegations of the complaint rather then the legal causes of action asserted. See Mitsubishi Motors Corp. v. Solor Chrysler-Plymouth, Inc., 473 U.S. 614, 633 n.9 (1985); see also Genesco, Inc. v. T. Kakiuchi & Co., Ltd., 815 F.2d 840, 846 (2d Cir. 1987). Further, one cannot attempt ...