Nanosolutions, LLC v. Prajza
2011 U.S. Dist. LEXIS 66127
| D.D.C. | 2011Background
- Nano and ABT sue Prajza and two Canadian entities (ACL and Ontario) over an Agreement in Principle (AIP) and related contracts involving AQISS beverages.
- AIP provisions include a broad arbitration clause (Ontario law, arbitration in Toronto) and a mutual sublicense related to the Roddick Agreement.
- Prajza allegedly breached the 2007 Employment Agreement, ABT alleges misrepresentations and other pre-AIP misconduct by Prajza, and ACL/Ontario are alleged to have breached the AIP.
- Plaintiffs terminate the AIP; ACL/Ontario file a Notice to Arbitrate in Ontario; plaintiffs file suit in DC and seek to amend.
- Court grants leave to amend; stays some counts pending arbitration and denies others on scope grounds.
- Arbitration issues center on whether the AIP’s arbitration clause covers all claims, including pre-AIP employment disputes and claims relating to the Roddick Agreement.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether amendment of the complaint is allowed | Nano entitled to amend as of right. | Not necessary; moot. | Granted; amendment allowed. |
| Whether the AIP arbitration clause is valid and enforceable | Fraud in inducement of AIP invalidates arbitration clause. | Fraud in inducement of entire AIP precludes court review; clause valid under Buckeye/Prima Paint. | Arbitration clause enforceable; claims to be decided by arbitrator. |
| Whether the AIP arbitration clause encompasses all of plaintiff's claims | Clause does not cover certain pre-AIP employment claims and some Roddick-related issues. | Clause broad enough to cover all conflicts between parties, including pre-AIP claims relating to ongoing relationship and Roddick. | Count Three stayed; Counts arising from AIP generally stayed; employment claims pre-AIP stayed based on broad scope. |
| Scope of arbitration for ACL's obligations under the Roddick Agreement | ACL bound to Roddick dispute resolution; disputes fall outside AIP arbitration. | AIP governs disputes between ABT/Nano and ACL; Roddick provisions do not negate AIP. | ACL-related disputes arbitrable under AIP; such claims stayed. |
| Which counts remain for judicial resolution vs. arbitration | Some counts should be litigated in court; others belong in arbitration. | All claims within AIP scope should be stayed pending arbitration. | Counts related to AIP stayed; Counts 1,2,5,6 stayed; Count 3 (fraud in inducement of AIP) stayed; other claims resolved through arbitration. |
Key Cases Cited
- Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006) (separation of validity of arbitration clause from contract overall)
- Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (1967) (fraud in the inducement of the contract vs. arbitration clause)
- AT&T Technologies, Inc. v. Communications Workers, 475 U.S. 643 (1986) (interpretation of arbitration clauses; presumption in favor of coverage)
- Granite Rock Co. v. International Brotherhood of Teamsters, 130 S. Ct. 2847 (2010) (arbitrability presumption; resolve scope in favor of arbitration)
- Smith/Enron Cogeneration Ltd. P'ship, Inc. v. Smith Cogeneration Int'l, Inc., 198 F.3d 88 (2d Cir. 1999) (New York Convention applicability and FAA framework)