MGP Electronics, Inc. v. Electronic Design & Sales, Inc., 1:19-cv-00483

Plaintiff MGP Electronics (Michigan corp.) and Defendant Electronic Design & Sales (Indiana corp.) had a distribution agreement making MGP an exclusive sub-representative in the Detroit area.
The parties’ contract contains a broad arbitration clause covering “any controversy, claim or dispute arising out of or relating to this Agreement, whether arising during or after the period of this Agreement.”
MGP sued for breach, unpaid commissions, and related contract claims; MGP also initiated arbitration and moved to stay federal litigation.
Defendant filed state-law defamation counterclaims alleging MGP’s president made false accusations to third parties (sometimes misrepresenting his identity).
The central dispute: whether the post-termination defamation counterclaims fall within the arbitration clause and thus must be arbitrated and the federal case stayed.
The Court concluded the arbitration clause is broad, compelled arbitration of the defamation claims, granted MGP’s motion to compel and stay, and ordered a joint status report after arbitration.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Defendant’s defamation counterclaims fall within the contract’s arbitration clause	The clause is broad and covers any dispute “arising out of or relating to” the agreement, including defamation tied to the business relationship; MGP also will assert truth (contract violations) as a defense	Defamation arose after termination and is a state-law tort outside the arbitration clause’s scope	Court: clause is expansive; defamation claims relate to the contract and are subject to arbitration
Whether the court should stay the federal proceedings pending arbitration	MGP is actively pursuing arbitration and is not in default; FAA requires stay when claims are arbitrable and movant not in default	Defendant sought to litigate defamation in court concurrently	Court: stay granted under the FAA; initial stay motion deemed moot; parties to report after arbitration

Allied-Bruce Terminix Cos., Inc. v. Dobson, 513 U.S. 265 (1995) ("involving commerce" interpreted broadly under the FAA)
Granite Rock Co. v. Int’l Bhd. of Teamsters, 561 U.S. 287 (2010) (question whether dispute is arbitrable is for the court; presumption favoring arbitration where agreement exists)
Gore v. Alltel Commc’ns, LLC, 666 F.3d 1027 (7th Cir. 2012) (state-law contract principles govern arbitrability; doubts resolved in favor of arbitration)
Kiefer Specialty Flooring, Inc. v. Tarkett, Inc., 174 F.3d 907 (7th Cir. 1999) (broad arbitration clauses can reach tort claims related to a distribution contract)
Int’l Bhd. of Elec. Workers, Local 21 v. Ill. Bell Tel. Co., 491 F.3d 685 (7th Cir. 2007) (arbitration should not be denied unless clause clearly does not cover the dispute)
C. Itoh & Co. (Am.) Inc. v. Jordan Int’l Co., 552 F.2d 1228 (7th Cir. 1977) (district court must stay proceedings under FAA when claims are referable to arbitration and movant is not in default)
Landis v. N. Am. Co., 299 U.S. 248 (1936) (district courts have inherent power to stay proceedings to manage their dockets)