Art Etc. LLC v. Angel Gifts, Inc.
686 F.3d 654
8th Cir.2012Background
- Art Etc., LLC sought a declaratory judgment that the sale of Angel Gifts inventory would infringe copyright under 17 U.S.C. § 101 et seq.; Angel Gifts and Schmit moved to stay pending arbitration.
- The district court denied the stay; the court of appeals has jurisdiction under 9 U.S.C. § 16(a)(1)(A) and affirms.
- Asset Purchase Agreement (APA) with Angel Gifts and Schmit dated March 28, 2007 plus a 2007 promissory note; the note was not attached to the APA and the APA contains an integration clause.
- In October 2008, the parties amended the APA and issued a revised promissory note (the October note) that includes an arbitration provision; the October note provides a process for offsetting note obligations for breaches of the APA and, if disputes over infringement arise, to arbitrate.
- Art Etc. discovered many images lacked proper consents to permit resale and sued Angel Gifts and Schmit for declaratory relief, breach, misrepresentation, and damages or rescission; the dispute centers on whether the arbitration clause applies to these claims.
- The district court held the arbitration clause applies only to disputes regarding offset of note payments for a breach, not to Art Etc.’s broader claims; the appeal challenges that interpretation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Scope of arbitration clause in October note | Art Etc. seeks declaratory relief and damages under the APA, not offsetting note payments. | Arbitration covers disputes about infringements when Art Etc. offsets note obligations; broader monetary claims fall within the clause. | Arbitration does not cover Art Etc.’s broader claims; only disputes about offsetting note payments for a breach fall within the clause. |
Key Cases Cited
- United Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574 (U.S. 1960) (arbitration requires voluntary agreement; absence of agreement precludes arbitration)
- Suburban Leisure Ctr., Inc. v. AMF Bowling Prods., Inc., 468 F.3d 523 (8th Cir. 2006) (de novo review of contract interpretation in denial of stay pending arbitration)
- Asia Pac. Indus. Corp. v. Rainforest Café, Inc., 380 F.3d 383 (8th Cir. 2004) (apply state contract principles with policy favoring arbitration)
- Fashion Fabrics of Iowa, Inc. v. Retail Investors Corp., 266 N.W.2d 22 (Iowa 1978) (read contract language to give effect to all provisions; avoid superfluity)
- Wilson v. Farm Bureau Mut. Ins. Co., 770 N.W.2d 324 (Iowa 2009) (interpretation of offsets and breaches under contract)