United States District Court, C.D. California
ORDER DENYING PLAINTIFF'S MOTION TO COMPEL ARBITRATION [Dkt. No. 6]
DEAN D. PREGERSON, District Judge.
Presently before the court is Defendant Witt Company ("Witt")'s Motion to Dismiss Plaintiff's Complaint. (Dkt. No. 6.) Having considered the submissions of the parties and heard oral argument, the court denies the motion and adopts the following order.
RISO manufactures and distributes printing and duplicating hardware and supplies. (Complaint, Ex 3. at 3.) Witt is a seller of office technology products and related services, including Riso duplicators. (Id.) Witt has been an authorized dealer of products since approximately 1988. (Id.)
On April 1, 2011, the parties entered into an Asset Purchase Agreement ("the Agreement"), under which Witt acquired seven of RISO's markets in California and Arizona. (Id. at 4.) The Agreement included an arbitration provision, which states, in relevant part, "Except as provided in subsection (iii), any controversy or claims arising out of or relating to this Agreement shall be determined exclusively by binding arbitration...." (Agreement § 9.3, Compl. Ex. 5 at 34.) Subsection (iii) states:
Notwithstanding the binding arbitration provision of this section 9.3, in the event of a breach, either Party shall have the right to bring an action in any court of competent jurisdiction for injunctive relief or remedy. The filing of any such action or remedy will not waive [RISO]'s or [Witt]'s right to compel arbitration under this Section for other matters that are not the subject of such action or remedy.
Subsequent to the execution of the Agreement, the parties unsuccessfully attempted to negotiate a new Dealer Agreement. (RISO I at 4.) Absent a new Dealer Agreement, and the Agreement notwithstanding, RISO threatened to stop selling its products and services to Witt after March 13, 2013. ( Id., Compl. ¶¶ 10-11.)
On January 29, 2013, Witt filed a complaint ("the Oregon action") against RISO in the United States District Court for the District of Oregon. (Compl. ¶ 9.) Witt alleged that under the Agreement, RISO was obligated to do business with Witt until April 2014. See Witt Co. v. RISO, Inc. , 948 F.Supp.2d 1227, 1245 (D. Or. 2013). Witt therefore brought causes of action against RISO for breach of the Agreement and breach of the duty of good faith and fair dealing. (Id.) Witt sought injunctive relief preventing RISO from terminating Witt's authorized dealer status. (Compl., Ex. 1 at 20.) Witt also sought "all damages suffered by Witt company as a result of RISO's conduct...." (Id.)
RISO moved to dismiss Witt's claims under Federal Rule of Civil Procedure 12(b)(6). Witt , 948 F.Supp.2d at 1246. On June 7, 2013, the Oregon court granted RISO's motion and dismissed Witt's contract claims with prejudice. Witt , 948 F.Supp.2d at 1247-8.
On October 11, 2013, Witt filed a Demand for Arbitration before the American Arbitration Association, asserting claims for breach of the Agreement with respect to certain bonus payments and fraud in the inducement of the Agreement. (Compl., Ex. 5.) Witt's fraud in the inducement claim seeks rescission of the Agreement on the ground that Witt allegedly would not have entered into the Agreement had it known that RISO would not negotiate the terms of the Dealer Agreement in good faith and that RISO would terminate Witt's rights to sell RISO products in May of 2013. (Id. ¶ 22-28.)
On December 19, 2013, RISO filed the instant declaratory judgment action in this court. RISO seeks a declaratory judgment that Witt waived its rights to arbitrate the fraudulent inducement claim and is barred by res judicata, or collaterally estopped, from arbitrating the fraudulent inducement claim as a result of the Oregon action.
Witt now moves to compel arbitration of RISO's declaratory judgment action and ...