Tk Services, Inc. v. Rwd Consulting, LLC
263 F. Supp. 3d 64
| D.D.C. | 2017Background
- TKS (a government contractor) and RWD entered a Mentor Subcontractor Service Agreement governing work on a Chimes subcontract to provide O&M services at the EPA headquarters; the Mentor Agreement required joint deposit of contract funds and allocated profits/fees.
- The Mentor Agreement made TKS responsible for managing work and entitled it to profits (with RWD paid $5,000/month); parties used a joint bank account and TKS contributed working capital and equipment.
- TKS alleges that on March 23, 2017 RWD withdrew approximately $35,000 from the joint account, terminated TKS’s online access and site access, and unilaterally terminated the Mentor Agreement; TKS asserts breach, conversion, unjust enrichment, and seeks equitable relief and an injunction.
- The Mentor Agreement contains a broad arbitration clause requiring AAA arbitration of any controversy arising out of the Agreement, and specifying applicable law and that awards are final and enforceable in court.
- RWD moved to compel arbitration and to dismiss; TKS sought a preliminary injunction to reinstate its role and to sequester funds. The court evaluated whether the dispute (and the requested interim equitable relief) must be decided in arbitration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability of arbitration clause | Clause does not expressly cover injunctive/equitable relief; Court can issue interim relief despite arbitration clause | Agreement’s broad language and incorporation of AAA rules covers all disputes, including interim relief via arbitrators | Arbitration clause is enforceable; parties must arbitrate all claims except Count IV which sought equitable relief but is nonetheless subject to arbitration process for interim relief options |
| Court’s authority to grant preliminary injunction while arbitration pending | Court may preserve status quo and issue injunction pending resolution; injunction needed to prevent dissipation of funds and irreparable harm to TKS | Interim relief is available from arbitrators under AAA rules; injunction in aid of arbitration requires showing that arbitration’s integrity is threatened | Court held TKS failed to show threat to arbitration or requisite showing for injunction in aid of arbitration; injunction denied as moot |
| Irreparable harm from loss of contract revenue and reputation | Loss of funds, equipment, access, and reputation will force TKS out of business and constitute irreparable harm | Economic losses are remedial; TKS delayed seeking relief; defendant introduced contrary evidence | Court found TKS did not meet the high standard for irreparable harm (economic loss generally insufficient; delay undermines urgency) |
| Remedy — stay/compel vs. adjudicate merits | Plaintiff requests injunction and merits adjudication in court | Defendant seeks dismissal/compel arbitration under FAA | Court compelled arbitration and dismissed the case; denied preliminary injunction as moot |
Key Cases Cited
- Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (federal policy favoring arbitration)
- First Options of Chi., Inc. v. Kaplan, 514 U.S. 938 (arbitration is a matter of consent/contract)
- Granite Rock Co. v. Int’l Bhd. of Teamsters, 561 U.S. 287 (framework for deciding arbitrability)
- Aliron Int’l, Inc. v. Cherokee Nation Indus., Inc., 531 F.3d 863 (motion to compel evaluated under summary-judgment framework)
- Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7 (elements required for preliminary injunction)
- Munaf v. Geren, 553 U.S. 674 (preliminary injunction is extraordinary relief)
- Sampson v. Murray, 415 U.S. 61 (economic loss ordinarily does not constitute irreparable harm)
- Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Hovey, 726 F.2d 1286 (judicial injunctions in aid of arbitration risk intruding on merits)