DataStrait Networks, Inc. v. S2 Security Corporation

Filing 22

MEMORANDUM OPINION AND ORDER. 1. Defendant's Motion to Dismiss or Stay and Compel Arbitration (Doc. No. 6 ) is GRANTED IN PART and DENIED IN PART as follows: a. To the extent that Defendant seeks to compel arbitration, the motion is GRANTED. b. To the extent that Defendant seeks dismissal, the motion is DENIED. 2. This matter is STAYED pending the outcome of arbitration. 3. The Court expressly retains jurisdiction over this case. (Written Opinion) Signed by Judge Donovan W. Frank on 6/23/2017. (BJS)

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA

DataStrait Networks, Inc.,

Civil No. 17-1355 (DWF/FLN)

Plaintiff,
v.

MEMORANDUM
OPINION AND ORDER

S2 Security Corporation,
Defendant.

Cyrus C. Malek, Esq., and Jack Y. Perry, Esq., Briggs & Morgan, PA, counsel for Plaintiff.
Anthony S. Fiotto, Esq., and Robyn Rebecca Schwartz, Esq., Goodwin Procter LLP; and
Joshua B. Strom, Esq., Robins Kaplan LLP, counsel for Defendant.

INTRODUCTION
This matter is before the Court on Defendant’s Motion to Dismiss or Stay and
Compel Arbitration (Doc. No. 6). For the reasons set forth below, the Court grants in
part and denies in part Defendant’s motion. The Court orders the parties to arbitration
and stays these proceedings pending the outcome.
BACKGROUND
Defendant S2 Security Corporation (“S2”) contracted with Plaintiff DataStrait
Networks, Inc. (“DataStrait”) to be S2’s sales representative for certain territories.
Pursuant to the Agreement, “The parties agree that any disputes or questions arising
hereunder, including the construction or application of this Agreement, shall be settled by
arbitration in accordance with the rules of the American Arbitration Association . . . .”

(Doc. No. 1-4 (“Am. Compl.”).) After S2 terminated the Agreement, DataStrait filed suit
alleging that S2 had failed to follow Minnesota law when it terminated the Agreement.
S2 now seeks to have the claims arbitrated.
DISCUSSION
S2 brings this motion pursuant to the Federal Arbitration Act (“FAA”). The FAA
provides that written agreements to arbitrate “shall be valid, irrevocable, and
enforceable.” 9 U.S.C. § 2. S2 asks the Court to dismiss or stay the proceedings because
the present dispute is governed by a written arbitration agreement. In determining
whether to compel arbitration, the Court usually must determine: (1) whether a valid
agreement to arbitrate exists between the parties; and (2) whether the specific dispute is
within the scope of that agreement. Pro Tech Indus., Inc. v. URS Corp., 377 F.3d 868,
871 (8th Cir. 2004). But under the FAA, parties can agree to have an arbitrator decide
whether claims fall within the scope of the agreement. See, e.g., Fallo v. High-Tech Inst.,
559 F.3d 874, 877 (8th Cir. 2009) (citing First Options of Chi., Inc. v. Kaplan, 514 U.S.
938, 943 (1995)). There is a strong presumption in favor of arbitration and any doubts
concerning arbitration rights should be resolved in favor of arbitration. Moses H. Cone
Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983).
Here, the parties do not dispute that the FAA applies or that the Agreement is
valid; the only dispute is whether DataStrait’s claims are within the scope of the
arbitration clause. But the Agreement provides that the arbitrator will decide “any
disputes or questions arising hereunder, including the construction or application of this
Agreement . . . .” (Am. Compl. ¶ 29 (emphasis added).) Similarly, under the rules of the
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American Arbitration Association, which were incorporated by reference into the
arbitration clause, the arbitrator decides whether a particular dispute falls within the
scope of the arbitration clause. 1 Thus, the parties agreed to have the arbitrator decide
whether a particular dispute falls within the scope of the arbitration clause. See Fallo,
559 F.3d at 878. And DataStrait does not make any argument to the contrary. The Court
therefore grants S2’s motion to stay the matter pending arbitration. If the arbitrator
decides that DataStrait’s claims are outside the scope of the arbitration clause, then the
parties will return here to litigate the merits.
ORDER
Based upon the foregoing, IT IS HEREBY ORDERED that:
1.

Defendant’s Motion to Dismiss or Stay and Compel Arbitration

(Doc. No. [6]) is GRANTED IN PART and DENIED IN PART as follows:
a.

To the extent that Defendant seeks to compel arbitration, the

motion is GRANTED.
b.

To the extent that Defendant seeks dismissal, the motion is

DENIED.
2.

This matter is STAYED pending the outcome of arbitration.

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(Doc. No. 9 (“Fiotto Aff.”) ¶ 4, Ex. B (“AAA Rules”) at R-7(a) (“The arbitrator
shall have the power to rule on his or her own jurisdiction, including any objections with
respect to the existence, scope, or validity of the arbitration agreement or to the
arbitrability of any claim or counterclaim.”).)

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3.

The Court expressly retains jurisdiction over this case.

Dated: June 23, 2017

s/Donovan W. Frank
DONOVAN W. FRANK
United States District Judge

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