MARJAM SUPPLY COMPANY v. FIRESTONE BUILDING PRODUCTS COMPANY, LLC et al
Filing
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OPINION (Stay). Signed by Judge William J. Martini on 1/7/13. (gh, )
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
Civ. No. 11-7119 (WJM)
MARJAM SUPPLY COMPANY,
Plaintiff,
OPINION
v.
FIRESTONE BUILDING PRODUCTS
COMPANY, LLC, FIRESTONE
DIVERSIFIED PRODUCTS, LLC,
ALLIED BUILDING PRODUCTS CORP.,
PERFORMANCE ROOFING
ASSOCIATES, INC., ROOFING
SPECIALTIES, INC., and CHARLES
“CHUCK” GOLDEN
Defendants.
WILLIAM J. MARTINI, U.S.D.J.:
In this antitrust litigation brought under the Robinson-Patman Act, 15 U.S.C.
§§ 13(a) and (d), Plaintiff Marjam Supply Company (“Marjam”) alleges that its
former supplier, Defendant Firestone Building Products Company, LLC
(“Firestone”), embarked on a campaign of price discrimination “designed and
intended to destroy, if not totally eliminate Marjam’s competitive position in the
Firestone Products and building materials markets . . . .” Compl. ¶ 71, ECF No. 1.
In a parallel arbitration brought under Indiana common law, Firestone alleges that
Marjam owes money on outstanding bills. Arguing that the arbitration would
usurp this Court’s antitrust decisions, Marjam moves for a stay pursuant to Federal
Rule of Civil Procedure 65. There was no oral argument. Fed. R. Civ. P. 78(b).
Because the arbitration will not prejudice this Court’s antitrust rulings, the motion
is DENIED.
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Marjam filed the Complaint in this litigation on December 6, 2011. Of the
seven counts in its Complaint, five were directed at Firestone. Counts I and III
allege violations of federal law, specifically §§ 13(a) and (d) of the RobinsonPatman Act. The other counts allege violations of state law. Count IV alleges
unfair competition, Count VI alleges “tortious interference and inducement of
breach of contract,” and Count VII alleges breach of the implied covenant of good
faith and fair dealing. After Firestone moved to dismiss, Marjam withdrew Count
VII. On November 30, 2012, the Court dismissed the state law claims but not the
federal antitrust claims brought under the Robinson-Patman Act.
Firestone’s three count arbitral demand alleges breach of contract, account
stated, and unjust enrichment and quantum meruit. Marjam argues that a stay of
the arbitration is justified by the “permeation doctrine.” “The permeation doctrine
permits a federal court to stay arbitration in order to preserve its exclusive
jurisdiction over non-arbitrable federal claims . . . .” D.C. Taylor, Co. v. Dynamit
Nobel of America, Inc., 558 F. Supp. 875, 880 (N.D. Ill. 1982) (citing Applied
Digital Tech., Inc. v. Continental Cas. Co., 576 F.2d 116 (7th Cir.1978); Dickinson
v. Heinold Sec., Inc., 661 F.2d 638 (7th Cir. 1981)). Under the permeation
doctrine, a stay is warranted where arbitration will “invade” the Court’s “sole right
to decide the ultimate issues in the antitrust claims.” Dynamit, 558 F. Supp. at 881.
Though it appears that the United States Court of Appeals for the Third Circuit has
yet to recognize this doctrine, the Court will assume that it is good law in this
District. The Court will also assume, along with the parties, that federal antitrust
claims are non-arbitrable.
In deciding permeation, the Court undertakes a “careful scrutiny of the
substance of the antitrust claims, the arbitrable issues, and the other facts
surrounding the parties’ dispute.” Id. First, to resolve the antitrust claims, the
Court will have to determine whether Firestone engaged in price discrimination
favoring Marjam’s competitors. See 15 U.S.C. §§ 13(a), (d). Second, to resolve
the arbitrable issues, an arbitrator will have to decide whether Marjam accepted
goods without remitting payment. “The issues in the two proceedings, arbitration
and the present suit, are dissimilar enough that the arbitrator could avoid deciding
the ultimate antitrust issues.” Dynamit, 558 F. Supp. at 883. Marjam fails to
identify “other facts surrounding the parties’ dispute,” id. at 881, that change the
calculus. A stay is unwarranted under the permeation doctrine.
Marjam’s argument the contrary fails to persuade. Marjam maintains that an
arbitrator “most certainly will have to inquire into the circumstances relating to the
sales in question and make critical determinations concerning pricing and other
issues touching on Marjam’s antitrust claims.” Pl.’s Br. 16, ECF No. 40. What
those “other issues” are Marjam does not say. Moreover, it is unclear what
“critical determinations concerning pricing” an arbitrator would make. Even if the
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arbitral decision has some small collateral estoppel effect on the Court’s antitrust
analysis, it will not “foreclose” Marjam’s antitrust claims. See Dynamit, F. Supp.
at 882.
Additionally, Marjam argues that a stay should issue because the claims
Firestone wishes to arbitrate qualify as compulsory counterclaims under Federal
Rule of Civil Procedure 13(a). Pl.’s Br. 26. The Court knows of no authority
requiring it to stay an arbitration based on Rule 13(a). On the contrary, strong
federal policy favoring arbitration weighs against a stay. As the Third Circuit
recognized years ago in a slightly different context:
If one of the disputing parties could, by filing a complaint alleging a
grievance outside the scope of the agreement for arbitration, force his
opponent to by-pass arbitration and assert counterclaims as to
controversies otherwise arbitrable, the desired intent and purpose of
arbitration agreements could be effectively frustrated.
Bristol Farmers Market and Auction Co. v. Arlen Realty & Devel. Corp., 589 F.2d
1214, 1221 (3d Cir. 1978) (quoting Local 11, IBEW v. G. P. Thompson Electric,
Inc., 363 F.2d 181 (9th Cir. 1966)).
Before concluding, the Court must address two remaining issues. First,
Marjam argues that a stay is proper under Indiana law, which governed the
Distributor Agreement between Marjam and Firestone. As Indiana appears to
apply the federal permeation doctrine, this argument fails. See Underwriting
Members of Lloyds of London v. United Home Life Ins. Co., 549 N.E.2d 67, 71
(Ind. Ct. App. 1990) (applying Seventh Circuit permeation doctrine). Second,
Marjam argues that it will suffer irreparable harm in the absence of a stay.
Usually, courts consider irreparable harm before issuing an injunction. See, e.g.,
N.J. Retail Merch’s Ass’n v. Sidamon-Eristoff, 669 F.3d 374, 385-86 (3d Cir.
2012). They also consider likelihood of success on the merits, the balance of
harms, and whether injunctive relief will serve the public interest. Id. It does not
appear that this traditional test applies in permeation doctrine cases. See Dynamit,
558 F. Supp. at 880-883; cf. In re Pharmacy Benefit Managers Antitrust Litig., 700
F.3d 109 (3d Cir. 2012) (staying arbitration without analyzing traditional
preliminary injunction factors). Assuming that the traditional test applies, and
assuming a likelihood of success on the merits, Marjam still cannot demonstrate
that arbitration will cause irreparable harm. An arbitrator will do exactly what a
court would do: resolve Firestone’s claims. Furthermore, Marjam cannot
demonstrate that the public interest favors a stay. Nor can it demonstrate that the
balance of harms weighs in its favor. While the arbitration will involve some
duplication of effort and resources, that cuts both ways. Accordingly, even if the
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Court had to apply the traditional preliminary injunction analysis, it would not rule
in Marjam’s favor.
CONCLUSION
“[A]ny overlap between the antitrust issues and the arbitration claims is too
insignificant to constitute permeation or to justify a stay of arbitration.” Dynamit,
558 F. Supp. at 883. Accordingly, the Court will DENY Marjam’s motion and
allow the arbitration to proceed.
/s/ William J. Martini
WILLIAM J. MARTINI, U.S.D.J.
Date: January 7, 2013
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