Pirtek USA, LLC v. Twillman et al
Filing
86
ORDER denying as moot 60 Motion to Expedite; denying as moot 61 Motion to Expedite; denying 62 Motion for clarification; denying 64 Motion for relief from judgment; granting 66 Motion to compel arbitration. Signed by Judge Roy B. Dalton, Jr. on 12/7/2016. (VMF)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
ORLANDO DIVISION
PIRTEK USA, LLC,
Plaintiff,
v.
Case No. 6:16-cv-01302-Orl-37TBS
MICHAEL J. TWILLMAN; DOLORES M.
TWILLMAN; and DONALD J.
TWILLMAN,
Defendants.
ORDER
This cause is before the Court on the following:
1.
The Parties’ Second Amended Case Management Report (Doc. 63), filed
October 21, 2016;
2.
Defendants’ Joint Motion for Expedited Discovery and Incorporated
Memorandum of Law (Doc. 60), filed October 21, 2016;
3.
Pirtek USA, LLC’s Response in Opposition to Defendants’ Joint Motion for
Expedited Discovery (Doc. 73), filed November 4, 2016;
4.
Defendants’ Joint Motion for Expedited Peremptory Trial Setting and to
Modify the Scheduling Order (Doc. 61), filed October 21, 2016;
5.
Pirtek USA, LLC’s Response in Opposition to Defendants’ Joint Motion for
Expedited Trial and to Modify the Scheduling Order (Doc. 74), filed
November 4, 2016;
6.
Defendants’ Joint Motion to Clarify or Modify the Preliminary Injunction
Order
and
Incorporated
Memorandum
of
Law
(Doc.
62),
filed
October 21, 2016;
7.
Pirtek USA, LLC’s Response to Defendants’ Joint Motion to Clarify or
Modify the Preliminary Injunction Order (Doc. 72), filed November 4, 2016;
8.
Defendants’ Joint Motion for Relief from the Court’s Preliminary Injunction
Order of October 6, 2016[,] and Incorporated Memorandum of Law
(Doc. 64), filed October 26, 2016;
9.
Pirtek USA, LLC’s Response in Opposition to Defendants’ Joint Motion for
Relief
from
the
Court’s
Preliminary
Injunction
(Doc.
68),
filed
71),
filed
October 31, 2016;
10.
Plaintiff’s
Notice
of
Supplemental
Authority
(Doc.
November 4, 2016;
11.
Defendants’ Reply Brief in Further Support of Their Joint Motion for Relief
from
the
Court’s
Preliminary
Injunction
Order
(Doc.
77),
filed
November 10, 2016;
12.
Pirtek USA, LLC’s Motion to Compel Arbitration and Stay Litigation and
Supporting Memorandum of Law (Doc. 66), filed October 28, 2016;
13.
Defendants’ Joint Response in Opposition to Pirtek USA’s Motion to
Compel Arbitration and Stay Litigation (Doc. 79), filed November 14, 2016;
and
14.
Pirtek USA, LLC’s Reply in Support of Its Motion to Compel Arbitration and
Its Motion for Attorney’s Fees (Doc. 82), filed November 28, 2016.
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BACKGROUND
On July 20, 2016, Plaintiff Pirtek USA, LLC (“Pirtek”) filed a Complaint with this
Court against Defendants Michael J. Twillman, Dolores M. Twillman, and Donald J.
Twillman (“Defendants”). (Doc. 1.) Asserting claims of unfair competition, fraud, and
breach of the non-compete and confidentiality provisions of a franchise agreement
(“Franchise
Agreement”)—which
included
an
arbitration
provision
(“Arbitration Agreement”)—Pirtek sought “preliminary and permanent” injunctive relief
against Defendants as well as “attorneys’ fees incurred in this action, as allowed by the
Franchise Agreement.” (See id.; Doc. 1-1, pp. 27–28; see also Doc. 2 (“PI Motion”).)
On July 22, 2016, the Court entered an Order, which set expedited deadlines for
service, briefing, and a non-evidentiary hearing (“Hearing”) concerning the PI Motion
(“Scheduling Order”).1 (Doc. 15.) Defendants did not immediately seek to modify the
Scheduling Order, nor did they request expedited discovery, continuation of the hearing,2
or the opportunity to present live testimony at the hearing. Rather, Defendants filed:
(1) a response to the PI Motion with supporting affidavits and documentary evidence
(Doc. 30, 31, 32, 33); (2) a motion to dismiss (Doc. 28 (“MTD”)); and (3) a motion to
transfer (Doc. 29 (“Transfer Motion”)). The Hearing took place as scheduled on
1
Consistent with the Scheduling Order, the Local Rules provide that “hearings
scheduled on applications for a preliminary injunction will be limited in the usual course
to argument of counsel unless the Court grants express leave to the contrary in advance
of the hearing” in accordance with Federal Rule of Civil Procedure 43. See Local
Rule 4.06(b); see also Fed. R. Civ. P. 43(c) (“When a motion relies on facts outside the
record, the court may hear the matter on affidavits or may hear it wholly or partly on oral
testimony or on depositions.”).
2
The Local Rules further provide that any hearing “may be postponed” upon
stipulation of the parties that additional time to prepare is desired. See Local
Rule 4.06(b)(4).
3
September 8, 2016, and Defendants’ counsel presented argument “on the basis of the
affidavits in the record.”3 (See Doc. 51.)
In mid-September, the parties filed an initial and an amended Case Management
Report (“CMR”). (Docs. 53, 54.) Without proposing a specific date for trial, the amended
CMR did little more than reiterate the time frames for deadlines suggested by the Court.
(See Doc. 54). Referencing a “contractual arbitration agreement”, the parties did advise
that they had agreed to arbitrate “all claims for damages pursuant to the Franchise
Agreement”; however, they disagreed on whether claims for injunctive relief must also be
arbitrated. (See Doc. 54, 4, 13.)4
Over Defendants’ joint objections, in October, the Court entered Orders:
(1) granting the PI Motion in part (Doc. 56 (“PI Order”)); and (2) denying the MTD and
Transfer Motion (Doc. 57 (“MTD Order”)).5 The limitations in the PI Order are effective
“until March 3, 2018 or dissolution of the injunction by the Court, whichever comes first.”
(Doc. 56, pp. 19–20.) On October 21, 2016, Defendants filed notice with the Court
advising that they: (1) had complied with the PI Order; (2) had “discontinued the business
of American Hydraulic Services, Inc.”; (3) did “not employ any individuals, including the
former employees of” Plaintiff’s franchisee, and (4) they are in the process of selling
3
At the Hearing, counsel for Defendants argued that preliminary injunctive relief
was inappropriate due to existing factual disputes concerning the St. Louis market, union
relations, the actual cause of the harm suffered by Plaintiff, and the severity of the harm
to Defendants that might result from an award of injunctive relief. (See Doc. 51.)
4
Given repeated references to the Arbitration Agreement—in the Complaint, the
CMRs, the Hearing, and Court Orders—the Court directed the parties to explicitly address
arbitration issues in a second amended CMR: “The Amended CMR must provide an
additional and distinct section concerning the timing of any arbitration proceedings and
the anticipated impact of such arbitration proceedings on this action.” (Doc. 57, p. 2.)
The parties timely filed their Second Amended CMR on October 21, 2016. (See Doc. 63.)
5
The parties’ familiarity with the Hearing and prior Court Orders is assumed.
4
assets of American Hydraulic Services, Inc. to a third party. (See Doc. 59, p. 2
(“PI Notice”).)
Defendants also sought additional rulings from this Court concerning the PI Order.
Specifically, Defendants filed motions seeking: (1) clarification or modification of the
PI Order pursuant to Rule 60(a) (Doc. 62 (“Rule 60(a) Motion”)); and (2) grant relief from
the PI Order in accordance with Rules 60(b)(5) and 60(b)(6) (Doc. 64 (“Rule 60(b)
Motion”)). Defendants also moved to: (1) modify the Scheduling Order; and (2) expedite
discovery and a permanent injunction trial (Docs. 60, 61 (“Schedule Modification
Motions”).
Plaintiff timely responded to Defendants motions (see Docs. 68, 71, 72, 73, 74
(“Plaintiff’s Responses”), filed a demand for arbitration with the American Arbitration
Association (“AAA”) on October 26, 2016 (see Doc. 67-2 (“Arbitration Demand”)), and
moved to compel arbitration and stay these proceedings on October 28, 2016 (Doc. 66
(“Arbitration Motion”)). Defendants “did not oppose the demand for arbitration of the
monetary claim” but—based primarily on the doctrine of waiver—they did object to
“shifting the pending injunction issues to the arbitral forum.” (Doc. 79, p. 2.) On
November 28, 2016, Plaintiff filed an authorized reply (Doc. 82 (“Reply”)). The pending
motions (Docs. 60, 61, 62, 64, 66) are now ripe for adjudication.
RULE 60 MOTIONS
Defendants request that the Court modify the PI Order pursuant to Rule 60(a) and
that it relieve Defendants from the effect of the PI Order pursuant to Rule 60(b). (Docs. 62,
64.) Plaintiff opposes such relief. (Docs. 68, 72.)
5
I.
Rule 60(a) Motion
Rule 60(a) provides that the Court may “correct a clerical mistake or a mistake
arising from oversight or omission whenever one is found in a judgment, order, or other
part of the record.” The Rule provides a mechanism for courts to correct an order so that
it reflects what the court intended at the time of ruling; however, “[e]rrors that affect
substantial rights of the parties are beyond the scope of [R]ule 60(a).” See
Mullins v. Nickel Plate Mining Co., 691 F.2d 971, 973 (11th Cir. 1982); see also
Weeks v. Jones, 100 F.3d 124, 127 (11th Cir. 1996).
Here, based on Rule 60(a),6 Defendants “request that this Court issue an Order
clarifying the scope of paragraphs (1)(a)(ii) & (iv).” (Doc. 62, p. 3.) These paragraph
provide that Defendants are:
ii.
ENJOINED AND PROHIBITED from operating any business
which sells products and services substantially similar to
those provided by Pirtek or a Pirtek franchise within
St. Charles County, Missouri and within a 15-mile radius of
either St. Charles County or the Pirtek Overland Franchise
until March 3, 2018 or dissolution of the injunction by the
Court, whichever comes first;
*
iv.
*
*
ENJOINED AND PROHIBITED from using any proprietary
information, methods, or trade secrets maintained by Pirtek
which were disclosed to [any Defendant] by Pirtek or any other
persons or entities. This includes, without limitation the use or
employment of current and former Pirtek employees, agents,
MSSTs, and other persons familiar with Pirtek’s customer
lists, processes, materials, methods, procedures, suggested
pricing, specifications, and techniques.
(Doc. 56, pp. 19–20.) According to Plaintiff, the breadth of the geographic territory in the
6
Defendants cite no case law to support their Rule 60(a) motion. (See Doc. 62.)
6
paragraph 1(a)(ii) is too broad and should be reduced. (Doc. 62.) As to paragraph 1(a)(iv),
Defendants contend that they are unsure whether they may “employ the two former Pirtek
employees at all.” (Doc. 62, p. 3.) Defendants’ requests for “clarifications” concern the
parties’ substantial rights—not mere corrections of clerical mistakes. Further, given the
clarity of paragraph 1(a)(iv), the Court finds that Defendants’ uncertainty is unjustified.
Accordingly, the Rule 60(a) Motion is due to be denied.
II.
Rule 60(b) Motion
“On motion and just terms,” Rule 60(b) provides that courts may—in their
discretion—relieve a party from an order: (1) if applying the order “prospectively is no
longer equitable” (see Fed. R. Civ. P. 60(b)(5)); or (2) based on “any other reason that
justifies relief” (see Fed. R. Civ. P. 60(b)(6)). See Conn. State Dental Ass’n v. Anthem
Health Plans, Inc., 591 F.3d 1337, 1355 (11th Cir. 2009) (noting that Rule 60(b) motions
are directed to the sound discretion of district courts). Generally, this Court will not
exercise its discretion to grant such relief unless the movant establishes that “the
circumstances are sufficiently extraordinary to warrant relief.” See Galbert v.
W. Caribbean Airways, 715 F.3d 1290, 1294 (11th Cir. 2013); F.T.C. v. Lalonde,
545 F. App’x 825, 832 (11th Cir. 2013). As no such extraordinary circumstances are
present here, the Rule 60(b) Motion also is due to be denied.
ARBITRATION
I.
Legal Standards
As reflected in the Federal Arbitration Act (“FAA”), “federal policy strongly favors
arbitration.” See Krinsk v. SunTrust Banks, Inc., 654 F.3d 1194, 1200 n.17
(11th Cir. 2011); see also 9 U.S.C. § 2 (providing that arbitration agreements are “valid,
7
irrevocable, and enforceable save upon such grounds as exist at law or in equity for
revocation of any contract”). In accordance with this policy and the terms of the FAA,
courts of the United States, upon being satisfied that an arbitrable issue exists, must “on
application of one of the parties stay the trial of the action until such arbitration has been
had in accordance with the terms of the agreement . . . .” See 9 U.S.C. § 3.
II.
Discussion
A.
The Arbitration Agreement
The Arbitration Agreement is set out in normal type on two initialed pages of the
Franchise
Agreement,
which
was
executed
by
Plaintiff
and
Defendant
Michael J. Twillman. (Doc. 1-1, pp. 27–28, 38–39.) The remaining Defendants also
agreed—by executing a Personal Guaranty and Agreement to Be Bound Personally By
the Terms and Conditions of the Franchise Agreement—to the terms of the Arbitration
Agreement,7 which provides in relevant part:
DISPUTE RESOLUTION: INJUNCTIVE, RELIEF
13.
You and we agree as follows.
A.
Dispute Resolution. Except as qualified below in
Section 13.B, any dispute involving us . . . arising under, out
of, or in any way connected with or related to this Agreement,
the relationship between the parties or your Business must be
submitted to binding arbitration under the authority of the
Federal Arbitration Act and must be arbitrated in accordance
with the rules and procedures and under the auspices of the
American Arbitration Association. . . . Judgment upon the
award may be entered in any court having jurisdiction thereof.
*
*
*
7
As noted in the PI Order and discussed at the Hearing, Defendants agreed “to
be personally bound by each and every condition and term contained in the Franchise
Agreement . . . including without limitation the dispute resolution” provision. (See Doc. 57,
p. 2.)
8
B.
Injunctive Relief. Notwithstanding Section 13.A
above, . . . it is mutually agreed that in the event of a breach
or threatened breach of any of the terms of this Agreement by
you, we will forthwith be entitled to an injunction restraining
such breach . . . until such time as a final and binding
determination is made by the arbitrators. . . .
(Id. at 27 (emphasis added).)
The parties do not dispute the broad scope of the Arbitration Agreement, nor do
they contend that their disputes in this action fall outside the scope of the Arbitration
Agreement. (See Doc. 54, pp. 13–14; Doc. 79, p. 1 n.1 (“The Twillmans do not dispute
that the issue of damages is subject to arbitration under the terms of the Franchise
Agreement.”).) Rather, to avoid arbitration, Defendants rely on the doctrines of waiver and
estoppel.8 (Docs. 66, 82, 83.) Specifically, Defendants contend that Plaintiff “has waived
its right to have the issue of permanent injunctive relief heard by the Arbitrator, because
[it] has taken inconsistent positions in litigating this very issue, and because judicial
economy dictates that this Court hear the permanent injunction issue.”9 (Doc. 79, p. 1.)
8
Despite the breadth of the Arbitration Agreement, neither party has argued that
the arbitrator should resolve Defendants’ waiver and estoppel arguments. For this reason,
and because the Eleventh Circuit presumes that “questions regarding waiver based on
litigation conduct” are for the courts, the Court has addressed these issues. See Plaintiffs’
Shareholders Corp. v. S. Farm Bureau Life Ins. Co., 486 F. App’x 786, 789
(11th Cir. 2012) (rejecting argument that the court erred by addressing waiver arguments
absent “clear and unmistakable” evidence of an agreement to submit waiver issues to
arbitrator).
9
There is nothing economical about the AAA addressing damages while this Court
addresses the propriety of permanent injunctive relief related to the exact same dispute.
Accordingly, the Court rejects Defendants’ judicial economy argument. Similarly, the
Court rejects Defendants judicial estoppel argument because neither the facts nor the
procedural posture of this action commend it to the discretionary and equitable invocation
of judicial estoppel. See Burnes v. Pemco Aeroplex, Inc., 291 F.3d 1282, 1285
(11th Cir. 2002) (“Judicial estoppel is an equitable doctrine invoked at the court’s
discretion.”); Am. Nat’l Bank of Jacksonville v. Fed. Deposit Ins. Corp., 710 F.2d 1528,
1536 (11th Cir. 1983).
9
B.
Waiver
An agreement to arbitrate is waivable, and courts should not compel arbitration
“when the party who seeks to compel arbitration has waived that right.” In re Checking
Account Overdraft Litig., 754 F.3d 1290, 1294 (11th Cir. 2014) (noting that courts should
not compel arbitration “when the party who seeks to compel arbitration has waived that
right”); see also 9 U.S.C. § 3 (providing for enforcement of arbitration agreements so long
as “the applicant for the stay is not in default in proceeding with such arbitration”).
Nonetheless, courts must address waiver issues with “‘a healthy regard for the federal
policy favoring arbitration.’” See Grigsby & Assocs., Inc. v. M. Secs. Inv.,
635 F. App’x 728, 731–33 (11th Cir. 2015) (quoting Moses H. Cone Mem’l Hosp. v.
Mercury Constr. Corp., 460 U.S. 1, 24 (1983)). As such, parties bear a heavy burden in
seeking to establish waiver of arbitration rights. See id. at 732; Krinsk, 654 F.3d at 1200
n. 17.
Courts may find waiver when “under the totality of the circumstances,” the party
seeking to compel arbitration “has acted inconsistently with the arbitration right and, in so
acting, has in some way prejudiced the other party.” See S & H Contractors, Inc. v. A.J.
Taft Coal Co., 906 F.2d 1507, 1514 (11th Cir. 1990). Invocation of the litigation machinery
prior to demanding arbitration is inconsistent with arbitration rights, as is a lengthy delay
in seeking arbitration when coupled with other substantial inconsistent conduct. See
Grigsby & Assocs., Inc., 635 F. App’x at 731–33. Similarly, when determining whether a
party has been prejudiced, courts “may consider the length of delay in demanding
arbitration.” See S&H Contractors, Inc., 906 F.2d at 1514 (finding waiver of arbitration
right based on an eight month delay in demanding arbitration during which time the
10
applicant filed motions and took multiple depositions). Courts must also consider the
“expense incurred by [a] party from participating in the litigation process.” See id.; see
also Grigsby & Assocs., Inc., 635 F. App’x at 733–34 n.10 (finding no prejudice where a
party failed to offer evidence concerning the time and resources expended prior to request
for arbitration).
Here, the Court finds that Plaintiff’s initiation of this action was not inconsistent with
its right to arbitrate the issue of permanent injunctive relief. Courts often consider the
“merits of a requested preliminary injunction even where the validity of the underlying
claims will be determined in arbitration.” See Nicosia v. Amazon.com, Inc., 834 F.3d 220,
238 (2d Cir. 2016); Benihana, Inc. v. Benihana of Tokyo, LLC, 784 F.3d 887, 894–95
(2d Cir. 2015) (“Where the parties have agreed to arbitrate a dispute, a district court has
jurisdiction to issue a preliminary injunction to preserve the status quo pending
arbitration.”); Cell Tower Lease Acquisition, LLC v. Rego Park N.H. Ltd., 39 N.Y.S.3d 795,
796 (Nov. 3, 2016)(construing arbitration agreement as permitting judicial injunctions, “in
keeping with the [FAA]”). Thus, there is nothing unusual about seeking preliminary
injunctive relief from the Court and reserving all other issues—including permanent
injunctive relief—for arbitration.
Viewing the Arbitration Agreement with “‘a healthy regard for the federal policy
favoring arbitration’”—which the Court must do, see Grigsby & Assocs., Inc.,
635 F. App’x at 733—it appears that the parties implicitly agreed to just such a bifurcated
procedure. (See Doc. 1-1, p. 27 (requiring submission of disputes to arbitration before the
AAA “[e]xcept as qualified below in Section 13.B”)); id. (providing in Section 13.B that,
“[n]otwithstanding Section 13.A above” Plaintiff will be entitled to an injunction “forthwith”
11
until such time as “a final and binding determination is made by the arbitrators”) (emphasis
added)). Further, Plaintiff directly quoted the Section 13.B exception in its Complaint,
noting that “notwithstanding the arbitration provisions,” the parties agreed that Pirtek
could file for injunctive relief in this Court. (See Doc. 1, ¶ 45 (quoting Arbitration
Agreement).)
Finally, the Court notes that the relatively brief delay between Plaintiff’s filing of its
Complaint and its Arbitration Demand and Motion—approximately three months—also
does not support a finding of waiver. (See Docs. 66, 67-2.) Such a short duration is not
inconsistent with Plaintiff’s Arbitration Demand and does not establish any prejudice to
Defendants. Moreover, Defendants failed to offer any specific evidence: (1) of their
expenditures in opposing injunctive relief in this Court; or (2) concerning whether such
expenditures exceed what Defendants would have spent had the preliminary injunctive
relief question been asserted in arbitration instead. (See Doc. 79.) see also Grigsby &
Assocs., Inc., 635 F. App’x at 733–34 n.10 Consequently, the Court finds that Defendants
have not met their heavy burden to establish waiver; thus, the Arbitration Motion is due
to be granted.
CONCLUSION
Accordingly, it is hereby ORDERED AND ADJUDGED that:
1.
Defendants’ Joint Motion for Relief from the Court’s Preliminary Injunction
Order of October 6, 2016 and Incorporated Memorandum of Law (Doc. 64)
is DENIED.
2.
Defendants’ Joint Motion to Clarify or Modify the Preliminary Injunction
Order and Incorporated Memorandum of Law (Doc. 62) is DENIED.
12
3.
Pirtek USA, LLC’s Motion to Compel Arbitration and Stay Litigation and
Supporting Memorandum of Law (Doc. 66) is GRANTED.
4.
Defendants’ Joint Motion for Expedited Discovery and Incorporated
Memorandum of Law (Doc. 60) is DENIED AS MOOT.
5.
Defendants’ Joint Motion for Expedited Peremptory Trial Setting and to
Modify the Scheduling Order (Doc. 61) is DENIED AS MOOT.
6.
Within fourteen days from the date of this Order, the parties are
DIRECTED to proceed to arbitration in accordance with their Arbitration
Agreement.
7.
The Clerk is DIRECTED to administratively close this case pending
arbitration, subject to the right of any party to apply to reopen the action
upon good cause shown.
8.
The parties are DIRECTED to file a joint status report on the progress of the
arbitration proceeding on Friday, December 30, 2016, and every 90 days
thereafter until conclusion.
DONE AND ORDERED in Chambers in Orlando, Florida, on December 7, 2016.
13
Copies:
Counsel of Record
14
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