Kawasaki Heavy Industries, Ltd. v. Bombardier Recreational Products, Inc.
660 F.3d 988
7th Cir.2011Background
- ARBITRATION clause in Settlement Agreement covers all claims arising out of or relating to the Settlement; BRP and Kawasaki dismissed patent suits and agreed to mediation/arbitration steps.
- Subordination clause required BRP to obtain Bank of Montreal subordination of BRP patents to prevent foreclosure from defeating the covenant not to sue.
- BRP emailed assurances to Kawasaki that Bank of Montreal would subordinate, which Kawasaki relied on to execute the Settlement Agreement (effective March 31, 2008).
- BRP later refused to provide the subordination agreement, leading Kawasaki to seek enforcement in Texarkana court and BRP to move to dismiss or stay pending arbitration.
- Texarkana Court ruled it lacked jurisdiction over Settlement Agreement disputes; Kawasaki appealed, then voluntarily dismissed and filed the current action in district court.
- This appeal concerns whether BRP waived arbitration rights and whether non-signatories (Bank of Montreal, Marcus, Goethals) can be bound or compelled to arbitrate; BRP seeks to compel arbitration; Kawasaki seeks remedies for breach-related claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether BRP waived the right to arbitrate | Kawasaki argues BRP's litigation conduct shows waiver | BRP argues conduct consistent with arbitration and no waiver | No waiver; BRP acted consistently with arbitration rights |
| Whether non-signatories can enforce/arbitrate | Kawasaki does not want arbitration against non-signatories | BRP argues non-signatories can enforce/arbitrate | Non-signatories' rights not ripe; BRP lacks standing to assert them; vacated for future dispute between Kawasaki and non-signatories |
Key Cases Cited
- Cabinetree of Wisconsin v. Kraftmaid Cabinetry, 50 F.3d 388 (7th Cir. 1995) (presumption of waiver when party proceeds in court; factors for totality of circumstances; diligence weighs heavily)
- St. Mary's Med. Ctr. of Evansville, Inc. v. Disco Aluminum Prods. Co., Inc., 969 F.2d 585 (7th Cir. 1992) (waiver factors; prejudice relevant but not necessary for waiver; litigation conduct analyzed)
- Faulkenberg v. CB Tax Franchise Systems, 637 F.3d 801 (7th Cir. 2011) (motion to stay/dismiss not sole measure of waiver; not dispositive to arbitrate)
- Sharif v. Wellness Int'l Network, Ltd., 376 F.3d 720 (7th Cir. 2004) (waiver analysis; arbitration right not waived solely by some litigation steps)
- Briggs & Stratton v. Local 232, Intl. Union, AFL-CIO, 36 F.3d 712 (7th Cir. 1994) (arbitration clause elective vs mandatory; impact on waiver analysis)
- Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (1983) (FAA policy favoring arbitration; enforcement despite non-arbitral presence)
- St. Mary's Med. Ctr. of Evansville, Inc. v. Disco Aluminum Prods. Co., Inc., 969 F.2d 585 (7th Cir. 1992) (prejudice weighing in waiver; strong factors)
- GILMER v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991) (FAA general policy favoring arbitration)