Innotec LLC v. Visiontech Sales, Inc. et al, No. 3:2017cv00007 - Document 144 (W.D. Va. 2018)
Court Description: MEMORANDUM OPINION. Signed by Senior Judge Glen E. Conrad on 9/14/18. (hnw)
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CLERKS OFFICE U.S. DISX COURT AT ROANOKE,VA FILED SEF 1# 2212 IN THE UNITED STATES DISTRICT COURT FOR THE W ESTERN DISTRICT OF VIRGFNIA CHARLOTTESVILLE DIVISION JUL C. DLEY,CLERK BY:jn hurv cuEf eR?t IN NOTEC LLC, Plaintiff, V. VISION TECH SALES,I'NC.,eta1., CivilA ction N o.3:17CV 00007 D efendants. M XM ORANDUM OPINION V ISION TECH SA LES,lN C ., By:Hon.Glen E.Corlrad SeniorUùited StatesiDistrictJudge Counterclaim Plaintiff, INN OTEC,etal., Counterclaim Defendants. . On July 20,2018,the courtgranted the defendants'm otion to compelarbitration as to CountIoftheplaintiffscomplaint.The courtdirected the partiesto briefthe issue ofwhether theremaining claiinsshould be stayed pending theresolution ofthearbitration proceedings. The parties have tsled simultaneous briefs setting forth their respective positions on tllis issue. Additionally,the plaintiffhas renewed its m otion for sanctions based'on alleged violations of discovery orders, and the defendants have moved to refer the case for p ediation. For the Innotec LLC v. Visiontech Sales, Inc. et al Doc. 144 following reasons,the court w ill tem porarily stay a1l f'urther proceedings pending arbitration, w ith the exception ofthose relatqd to the plaintiff sm otion for sanctions and the enforcem entof the parties' existing discovery obligations. The defendants' m otion to refer the case for mediation willbe denied. Dockets.Justia.com B ackzround OnFebnzary 1,2017,Innotec,LLC (Eilm' lotec'')filedtheinstantactionagainstVisiontech Sales,lnc.(Cdvisiontech'),Richard Perrault,and Visiontech Sales Group Hohg Kong,Ltd. (SCVSG HK''),seeking to obtain paymentforproducts ordered from Irmotec. The complaint containsfsvecounts:(1)ççBreachofContractby F isiontechj- Forthesaleofgoodspursuantto theExclusivity Agreemenf';(2)dsBreach ofContractby (Visiontech)- Unpaid invoicesforthe sale ofgoods and open purchase orders'';(3) SdunjustEnrichmentagainst gvisiontechj'';(4) çsBreach ofContractby VSG HK'';and (4)StpersonalLiability againstOwnersofgvisiontechj and VSG HK.'' Compl.!! 30-44,DocketNo.1.OnM arch 16,2017,thedefendantsanswered Innotec's com plaintand filed counterclaim s against Ilm otec and its managing m ember,Allen Ting. The Exclusivity Agreem ent referenced in Cotmt I of the complaint is one of several written agreementson which the parties'claim sarebased. Itisthe only agreementthatcontains qn arbitration clause.Theclauseprovides,inpertinentpart,that'Cgaqnycontroversiesordisputes arising outoforrelated to thisAgreem entshallberesolved by binding arbitration in accordance with the then-currentCom mercialArbitration Rules of the Am erican Arbitration Association.'' Compl.Ex.B at3,DocketNo.1-2.TheclausefurtherprovidesthatdGgtlhedecision renderedby thearbitratorts)shallbefinalandbinding on thepartiesy''andthatCjudgmentmaybeenteredin confonnitywith thedecision inanycourthavingjurisdiction.''1d. On M arch 9,2018,the defendants m oved to compelarbitration as to Count I of the com plaint. Irmotec opposed the motion,arguing,in part,thatthe defendantswaived the rightto enforce the arbitration provision by notfiling the m otion until after the parties had engaged in discovery and the plaintiff had m oved for sanctions for alleged discovery violations. Upon 2 reviewingthepalies'briefsand theapplicable law,thecourtconcluded thatlnnotec had notmet itsCiheavyburden''ofprovinpwaiver. SeeJuly 20,2018M em.Op.12,DocketNo.132(quoting Rota-M cLartyv.SantanderConsumerUSA.lnc.,700F.3d690,702(4th Cir.2012)).Thecourt further concluded that the arbitration provision of the Exclusivity Agreement is enforceable againstInnotec,and thatthe claims asserted in CountIfallwithin the scope ofthe provision. Accordingly,thecourtgranted thedefendants'motion to compelarbitration asto Count1. ' . Thedefendantsdid notmove to com pelarbitration asto any othercotmtin the complaint, and neither side addressed how the rem aining claim sshould proceed in the eventthatthe court required arbitration of Count 1. Consequently, the court permitted the parties to submit additionalbriefing on thatissue. Specifically,the courtgave thepartiesuntilAugust3,2018 to file çtsim ultaneousbriefs addressing the issue ofwhetherthe remaining claim s should be stayed pending the arbitration proceedingsrelated to Count1.5' 1d.at17. On August 2,2018,Innotec renewed its motion fpr sanctions for alleged discovery violations by the defendants. The following day, the parties filed briefs setting forth their respective positions on the propriety Of staying the rem aining claim s pending arbitration. 1 o n August7,2018,the defendants,who are now represented by differentcounsel,moved to refer theentirecasetoaneutralmagistratejudgeformediation. 1The courtnotes thatthe defendants' brief wentwell beyond the court's instructions and argued entirely new positions in the alternative,ngmely th4tthe courtshould compelarbitration ofCounts11and IlI and dismiss Counts IV and V for failure to state a claim. The courtdeclines to consider these alternative arguments,which have notbeenraised in any motionfiled bythedefeùdants. See.e.g.,Herbertv.Nat'lAcad. ofSci.,974 F.2d 192,195 (D.C.Cir.1992)(emphasizing thatconsiderationofnew argumentsraisedforthe frsttimeina rqply briefwould be'tmanifestlyunfair''totheopposing side);W allacev.Trost,No.8:13-cv03473,2014 U.S.Dist.LEXIS 124292,at#11(D.Md.Sept.4,2014)(noting thata reply briefisnota motion);seealsoFed.R.Civ.P.12(b)(providingthatamotiontodismissforfailuretostateaclaim Ssmustbe madebeforepleadingifaresponsivepleadingisallowed''). D iscussion 1. M otion to R efer the C ase for M ediation Before turning to the prim ary issue of whether to stay further proceedings pending arbitration, the court will briefly address the defendants' new m otion to refer the case for m ediation. The defendants specifically seek to have the entire case referred to m ediation and requestthatthe mediation be conducted by a magistrate judge who has nothad any prior involvement in the case. Ilm otec opposes the motion and altem atively argues that any court- ordered mediationshouldbeconducted bythesamemagistratejudgewho haspresided overthe parties' discovery disputes. In light of the parties'disagreem ent,and given the court's prior deçision to com pel arbitration in accordance with the mandatory language of the Exclusivity Agreement, the court declines to refer the case for m ediation and will therefore deny the defendants,m otion.2 11. Proprietv ofStavine Further ProceedinzsPendine A rbitration Having previously compelled arbitration ofthe claims asserted in CotmtIof lnnotec's complaint,the courtm ustnow determ ine whether to stay the remaining claim s pending the resolution of the arbitration proceedings. $çA district court has broad discretion to stay proceedingsaspal' tofitsinherentpowerto controlitsown docket.'' United Statesex rel.Harbor Constr.Co.v.T.H.R.Enters.sInc.,311F.Supp.3d797,805(E.D.Va.2018)(citingLandisv.N. 2 The courtnotes however,that the Commercial Arbitration Rules of the American Arbitration , Association (($AAA'')require mediation in caseswhere a claim orcounterclaim exceeds$75,000,unlessa partytothearbitrationaffirmatively optsoutofthemediation processby notifyingtheAAA andtheother partlestothearbitration.SeeAAA CommercialArbitration RulesandM ediationProcedures(effectiveOct.1, 2013),RuleR-9,availableathttps: //www.adr.orgc ules(lastvisited Sept.11,2018). lfany pariy wishesto initiate mediation underthe auspices ofthe AAA,itmay do so ççby making a requestform ediation to any of the AAA'Sregionaloffices orcasemanagementcenters via telephone,email,regularm ailorfax,''orby filing a requestonline viatheAAA website. Id.atRule M -2. GsAbsentan agreem entofthe partiesto the contrary, the mediation shalltake place concurrently with the arbitration and shallnot serve to delay the arbitration proceedings.''Id.atRule R-9. 4 Am.Co.,299U.S.248,254(1936)), .seealsoAm.Recovery Co1'n.,96F.3dat97. In exercising such discretion,ç$a court must çweigh com peting interests and m aintain an even balance.''' HarborConstr.Co.,311F.Supp.3dat805(quotingLandis,299U.S.at255).ttW henarbitration islikely to settle questionsoffactpertinentto nonarbitrableclaims,dconsiderationsofjudicial economy and avoidance ofconfusion and possible inconsistentresults ...m ilitate in favor of staying the entire action.''' Am .HeartDisease Prevention Found.v.Huchey, 106 F.3d 389, 1997 U.S.App.LEXIS 1806,at*16 (4th Cir.1997)(unpublishedtable opinion)(quotingAJn. Home Assurance Co.v.Vecco Concrete Constr.Co.,629 F.2d 961,964 (4th Cir.1980)). $$1n such cases,thestay can apply to partieswhom ayplay no rolein thearbitration.'' Id. ln the instantcase,the courtagrees with the defendantsthatthe arbitration proceedings are likely to resolve factual questions relevant to m ost,if not all,of $he parties'claim s. In paticular,thedefendantsmaintain thata1lofInnotec'sclaim sarebarred by whatthey referto as the %slune 14,2016 Agreement''between Irmotec and Visiontech. Seese.g.,Answer,Defenses, Jul'y Demand and Counterclaim 7,DocketN o.10. ln theirm sponsive pleading,the defendants contend thatthe June 14,2016 Agreementçssuperseded''the Exclusivity Agreem enton which Count 1 is based,that it constituted a Sinovation and settlem entof any debts due''under the Exclusivity Agreement and other existing invoices,and thatInnotec tçcomm itted the tirst and priorm aterialbreaches ofthe June 14,2016 Agreem ent.'' Id.at 8-28. The defendants plead ûsnovation''and ççpriormaterialbreach''asaffirm ativedefensesto each ofInnotec'sclaim s, Id.at They also asserta cotmterclaim for breach of contractbased,at least in part,on the snm e allegationsregarding the June 14,2016 A greem ent. 1d.at36-40. Thus,the factualquestions surrounding the June 14,2016 Agreementare centralto the resolution ofthis case. Because these questions willlikely be considered and addressed during thearbitration proceedingsrelatedto Count1,thecourtbelievesthat(çconsiderationsofjudicial economy and avoidance of confusion and possible inconsistent results''m ilitate in favor of staying furtherproceedingson theremaining clam s.Am .Hom eAssurance Co.,629 F.2d at964. To alleviate Innotec's copcem s regarding alleged discovery violations by the defendants,the courtwillretainjurisdiction overthepending motiop forsanctionsand theenforcementofthe parties'existing discovery obligations.3 See. e.c.,ATA C Com .v.A rthur Treacher's.Inc.,280 F.3d 1091,1102 (6th Cir.2002)(noting thatIdample precedent''indicatesthata districtcourt retainsSjurisdiction to determinecollateralmatterssuch assanctionsfordiscovery abuseseven when a motion to stay a proceeding pending arbitration is granted'') (collecting cases). Additionally,to ensure thatthe arbitration proceedingsare Stused fordisputeresolution''and çûnot asa delay tacticr''the courtwillonly stay the action for a period of 120 days. Harbor Constr. Co.,311F.Supp.3dat806;seealsoAm.HomeAsstlranceCo.,629F.3d at964(observingthat theçsdistrictcourthassuch controlofitsdocketasto insureagainsttmwarranted delay dueto the arbitration proceedings''). The 120-day period shallonly be extended upon a showing ofgood CaUSC. Conclusion For the reasons stated,the defendants' motion to refer the case to m ediation willbe denied. The courtw illexercise its discretion to stay al1further proceedings in this action for a period of 120 days,with the exception ofthose related to the plaintiff's m otion forsanctions and 3The'pendingmotionforsanctionswillbedecidedbytheundersigneddistrictjudge. 6 theenforcementofthe parties'existing discovery obligations. On orbeforeDecem ber11,2018, thepartiesshallfileajointreportsummarizingthestatusofthearbitrationproceedingsandtheir respectivepositionson the continuing need forastay. The Clerk isdirected to send copiesofthismem orandum opinion and the accompanying orderto a11counselofrecord. DATED:Thisl day ofSeptem ber,2018. SeniorUnited StatesDistrictJudge.
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