United States District Court, N.D. California
ORDER RE NEC DEFENDANTS' MOTION TO COMPEL ARBITRATION
SUSAN ILLSTON, District Judge.
Currently before the Court is the NEC defendants' motion to compel arbitration. Pursuant to Civil Local Rule 7-1(b), the Court determines that this matter is appropriate for resolution without oral argument and VACATES the hearing scheduled for April 18, 2014. For the reasons set forth below, the Court GRANTS IN PART AND DENIES IN PART the motion to compel arbitration.
The current motion is brought by five related defendants: NEC Corporation; NEC LCD Technologies, Ltd.; NEC Display Solutions of America, Inc. ("NDSA"); NEC Electronics America, Inc.; and NEC Corporation of America, Inc. (collectively, "NEC"). On February 23, 1998, plaintiff Gateway, Inc. ("Gateway") entered into a purchase agreement with Mitsubishi Electronics America - a predecessor to NDSA. See Declaration of Dylan Dunavan ("Dunavan Decl.") Ex. A. The agreement stated that it would "remain in effect for a period of three (3) years, " and would "automatically renew for an additional one (1) year" unless the agreement was properly terminated. Id. ¶ 18. The agreement contained a detailed procedure for handling "[a]ll disputes under this Agreement, of any nature whatsoever...." Id. ¶ 21. Specifically, it stated that "[a]ll disputes under this Agreement shall be submitted to arbitration under the rules of the American Arbitration Association (AAA') with the location for arbitration to be in the State of South Dakota." Id.
NEC now moves to compel Gateway, as well as plaintiffs Acer America Corporation ("Acer"), and Gateway U.S. Retail, successor-in-interest to eMachines ("eMachines"), to submit all of their claims against NEC to arbitration. NEC further moves for an order staying this action as to NEC, pending the arbitration.
Section 4 of the Federal Arbitration Act ("FAA") permits "a party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration [to] petition any United States District Court... for an order directing that... arbitration proceed in the manner provided for in [the arbitration] agreement." 9 U.S.C. § 4. Upon a showing that a party has failed to comply with a valid arbitration agreement, the district court must issue an order compelling arbitration.
The Supreme Court has stated that the FAA espouses a general policy favoring arbitration agreements. Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983); see also Hall Street Assoc., LLC v. Mattel, Inc., 552 U.S. 576, 581 (2008). Federal courts must enforce agreements to arbitrate rigorously. See Hall Street Assoc., 552 U.S. at 582. Courts are also directed to resolve any "ambiguities as to the scope of the arbitration clause itself... in favor of arbitration." Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Jr. Univ., 489 U.S. 468, 476 (1989).
The FAA provides that arbitration agreements generally "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. However, the strong presumption in favor of arbitration "does not confer a right to compel arbitration of any dispute at any time." Volt, 489 U.S. at 474. This is because "arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit." United Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582 (1960); see also McDonnell Douglas Fin. Corp. v. Pa. Power & Light Co., 858 F.2d 825, 831 (2d Cir. 1988) (stating that the purpose of the FAA "was to make arbitration agreements as enforceable as other contracts, but not more so" (internal quotation marks omitted)).
Plaintiffs concede that claims arising from Gateway's purchases from NDSA, made during the period between February 23, 1998 through February 23, 2002, may be sent to arbitration. However, plaintiffs contend that: (1) claims arising from purchases made outside of that time period are not subject to arbitration; (2) even during that time period, the agreement only covered direct purchases; (3) Acer and eMachines cannot be compelled to arbitrate; and (4) no NEC defendants other than NDSA - successor to the signatory to the agreement - should be entitled to enforce the arbitration clause. Plaintiffs further argue that, should the Court determine that arbitration is appropriate, the agreement's limitation of liability clause must be declared unenforceable. Finally, they contend that a stay of proceedings is inappropriate. The Court addresses each argument in turn.
1. Temporal Limitations of the Agreement.
Plaintiffs argue that only claims arising from purchases made during the agreement's time period may be sent to arbitration. Plaintiffs agree that the agreement's automatic renewal provision was triggered, and that the agreement was in effect from February 23, 1998 until February 23, 2002. NEC counters ...