78 F. Supp. 3d 1363
D. Colo.2015Background
- Let’s Go Aero (LGA) and Cequent entered a 2008 license for vehicle cargo-management products; they settled prior litigation in 2012 by a Settlement Agreement that terminated the license and included a broad arbitration clause (arbitration in Chicago, administered by AAA).
- The Settlement Agreement contains mutual releases for pre-Effective Date claims but expressly preserves claims arising from unlawful use of intellectual property occurring after the Effective Date (Jan. 28, 2012).
- LGA filed this suit (Second Amended Complaint) alleging post-termination IP and related tort claims (patent, trademark, copyright, false advertising, unfair competition, etc.).
- Cequent moved to compel arbitration and to stay proceedings; Magistrate Judge Hegarty previously issued a stay of proceedings pending resolution of that motion.
- LGA obtained a clerk’s entry of default after Cequent did not timely respond; Cequent immediately moved to set aside the default and sought leave to answer.
- A related enforcement action by Cequent to compel arbitration was pending in the Northern District of Illinois (Chicago), the forum named in the Settlement Agreement.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the clerk’s entry of default should be set aside | Default was proper because Cequent failed to answer | Cequent mistakenly believed the entire case was stayed while it sought arbitration; moved immediately to set aside | Default set aside for good cause; Cequent given 7 days to answer |
| Whether the Settlement Agreement’s arbitration clause covers LGA’s claims | Many claims allege post-termination misconduct and thus fall outside the releases/arbitration | The clause is broad (“arising from or relating to”) and covers claims tied to pre-Effective Date conduct or that implicate contract-related rights | Court finds partial arbitrability: Claims 1,2,3,6,10,12 are arbitrable because they arise from/relate to the Settlement Agreement or implicate rights under it |
| Whether a Tenth Circuit court may compel arbitration in the forum specified (Chicago) | LGA: only a court in the designated forum may compel arbitration | Cequent: FAA §4 permits district court enforcement; arbitration provision specifies Chicago | Court lacks jurisdiction under Ansari to compel arbitration in Chicago; only court in Northern District of Illinois may issue §4 relief; therefore cannot compel arbitration here |
| Whether the entire federal case should be stayed pending arbitration | LGA: non-arbitrable claims should proceed; arbitration of some claims might not preclude litigation of others | Cequent: seeks stay of all proceedings pending arbitration | Court stays the action only as to the arbitrable claims (Claims 1,2,3,6,10,12) pending Illinois court resolution; reserves whether to stay the remaining non‑arbitrable claims and orders cross briefs on that issue |
Key Cases Cited
- AT & T Techs., Inc. v. Communications Workers, 475 U.S. 643 (1986) (courts decide arbitrability unless parties clearly delegate that issue to arbitrator)
- Moses H. Cone Memorial Hospital v. Mercury Construction, 460 U.S. 1 (1983) (federal policy favors arbitration and doubts about scope go to arbitration)
- Riley Manufacturing Co. v. Anchor Glass Container Corp., 157 F.3d 775 (10th Cir. 1998) (definition of disputes that "arise from" a contract for arbitrability analysis)
- P & P Industries, Inc. v. Sutter Corp., 179 F.3d 861 (10th Cir. 1999) ("arising out of or relating to" language indicates broad arbitration clause)
- Cummings v. FedEx Ground Package System, 404 F.3d 1258 (10th Cir. 2005) (broad arbitration clauses give rise to a presumption of arbitrability; collateral matters covered if they implicate contract rights)
- Ansari v. Qwest Communications Corp., 414 F.3d 1214 (10th Cir. 2005) (when parties specify an arbitration forum, only a district court in that forum may compel arbitration under §4)
- Image Software, Inc. v. Reynolds & Reynolds Co., 459 F.3d 1044 (10th Cir. 2006) (clarifies Ansari applies to venue concerns under §4)
- Nikwei v. Ross School of Aviation, Inc., 822 F.2d 939 (10th Cir. 1987) (setting aside default is committed to the district court’s discretion)