Robert Sommerfeld v. Adesta, LLC, 2 F.4th 758

Background

In 2009 Plaintiffs (Sommerfeld, Kawamoto, Benak) signed a Purchase Agreement for Old Adesta that included (1) indemnity obligations/guaranties for NYSTA-related work and (2) broad arbitration clauses (AAA rules, arbitration in Chicago) including a clause allowing purchaser to arbitrate unsatisfied NYSTA indemnities.
Plaintiffs later left Old Adesta; Old Adesta sued Kawamoto and Benak in Nebraska and federal court in Illinois for alleged restrictive covenant breaches and trade-secret misappropriation; those suits did not assert NYSTA indemnity claims.
In 2017 the parties executed a Settlement Agreement resolving the Nebraska and Illinois suits; the Settlement Agreement released claims arising from those suits, included restrictive covenants and return/destruction of alleged trade secrets, and contained a merger clause, but did not mention NYSTA claims, indemnification, or terminate the Purchase Agreement.
In 2019 New Adesta (formed in 2017 and owned by Old Adesta) initiated arbitration alleging Plaintiffs oversaw defective NYSTA work, giving rise to indemnity claims under the Purchase Agreement.
Plaintiffs filed a Nebraska declaratory-judgment action asserting the Settlement Agreement released the NYSTA claims; New Adesta removed, moved to compel arbitration and dismiss; the district court compelled arbitration and dismissed the action.
The Eighth Circuit affirmed: the Settlement Agreement did not abrogate or modify the Purchase Agreement arbitration clauses, the NYSTA indemnity claims fall within arbitration scope, and any release/satisfaction defense is for the arbitrator to decide.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Existence of a valid arbitration agreement	Settlement released NYSTA claims, so no arbitration duty	Purchase Agreement contains valid arbitration clauses that survive settlement	Valid arbitration agreement exists
Whether Settlement Agreement abrogated arbitration clauses	Merger/integration in Settlement superseded prior agreements and revoked arbitration	Settlement did not mention NYSTA or the Purchase Agreement and did not abrogate arbitration	Settlement did not abrogate, modify, or terminate arbitration clauses
Scope: Do NYSTA indemnity claims fall within arbitration clause?	NYSTA claims were released / outside dispute scope	NYSTA indemnity claims arise under Purchase Documents and fall within arbitration scope	NYSTA claims are within arbitration scope; release is affirmative defense for arbitrator
Dismissal vs. stay of court action	Court should not dismiss the declaratory action	Dismissal is appropriate if arbitration will resolve entire controversy	District court did not abuse discretion in dismissing the action

Key Cases Cited

Henry Schein, Inc. v. Archer & White Sales, Inc., 139 S. Ct. 524 (2019) (district courts decide whether a valid arbitration agreement exists before sending disputes to arbitrators)
Parm v. Bluestem Brands, Inc., 898 F.3d 869 (8th Cir. 2018) (two-step arbitrability inquiry: existence and scope of arbitration agreement)
Donaldson Co. v. Burroughs Diesel, Inc., 581 F.3d 726 (8th Cir. 2009) (de novo review of motion to compel arbitration)
AT&T Technologies, Inc. v. Communications Workers, 475 U.S. 643 (1986) (courts should generally avoid deciding merits when determining arbitrability)
In re American Express Fin. Advisors Sec. Litig., 672 F.3d 113 (2d Cir. 2011) (settlement language can, in some circumstances, revoke consent to arbitrate by abrogating prior agreement terms)
Green v. SuperShuttle Int'l, Inc., 653 F.3d 766 (8th Cir. 2011) (district courts may dismiss rather than stay when arbitration will resolve the entire controversy)