SANKALP RECREATION PVT. LTD. et al v. PRAYOSHA RESTAURANT GROUP, LLC et al

Filing 35

REPORT AND RECOMMENDATIONS re 10 MOTION to Stay Action Pending Arbitration filed by PRAYOSHA RESTAURANT GROUP LLC, SURESH N. PATEL Objections, if any, to R&R due by 3/31/2014. Signed by Magistrate Judge Joseph A. Dickson on 03/17/2014. (nr, )

NOT FOR PUBLICATION

THE UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
SANKALP RECREATION PVT. LTD.
and NEETU KAILASH GOENKA,

Civil Action No. 2:13-cv-05529
(JLL) (JAD)

Plaintiffs,
v.

PRAYOSHA RESTAURANT GROUP,
LLC et al,

REPORT AND RECOMMENDATION 0
DEFENDANTS' MOTION TO COMPE
ARBITRATION
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JOSEPH A. DICKSON. U.S.M.J.

This matter comes before the Court upon motion by defendants, Prayosha Restaur t
Group, LLC (Delaware), Prayosha Restaurant Group, LLC (New Jersey), and Suresh N. Pa 1,
(collectively the "Defendants"), to stay this matter pending arbitration (the "Motion to Compel ).
(ECF No. 10). 1 Pursuant to Fed. R. Civ. P. 78, no oral argument was heard. Upon considera · n
of the parties' submissions, and for the reasons stated below, it is the recommendation of this Co
that Defendant's Motion to Compel be GRANTED.

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The Court notes that while Defendants filed a motion to stay rather than to compel, Defendants' legal analysis in
moving papers, and Plaintiffs' opposition thereto, both pmport argnments as to whether or not arbitration should
compelled. Similarly, the relief sought by Defendants is to arbitrate the trademark claim. For these reasons, and in
interests of judicial efficiency, the Court treats the current motion as a motion to compel arbitration and applies
applicable standard of review enabling dismissal of this matter.

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I.

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BACKGROUND.
Sankalp Recreation Pvt. Ltd. (hereinafter "Sankalp") and Neetu Kailash Goe

(collectively "Plaintiffs"), commenced this action for trademark infringement and un
competition on September 17,2013. (Compl. ~ 1, ECF No.1). Sankalp is the exclusive franchi r
of 'Sankalp' branded restaurants and the exclusive licensor of the trademark owned by Ne u
Kailash Goenka. @).

Defendants executed a licensing agreement (the "Master Lice e

Agreement") with Plaintiffs for use of Sankalp's intellectual property and trade secrets in cert ·
United States restaurant franchises. (Def. Br., ECF No. 10-2 at 3).
Plaintiffs allege that Defendants attempted to sub-license a franchise to a non-party, Hi
Food Inc., and further, that this franchise did not meet Sankalp's standards. (Id.). Plaintiffs t
terminated the Master License Agreement due to the aforementioned breach allegation. (Co
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1, ECF No.2). On October 24, 2013, Defendants filed this Motion to Compel, as a result of

arbitration clause (hereinafter the "Arbitration Clause") within the Master License Agreem
(ECF No. 10-2). The Arbitration Clause states:
This agreement shall be governed by the prevailing laws of India.
Any dispute/claim or contentions in respect of or arising out of or
relating in any matter to the provisions of this agreement shall be
settled amicably. Should such Amicable Settlement prove
impossible then the same shall be settled by arbitration under the
rules of arbitration.
(Def. Br., ECF No. 10-2 at 3).
Upon receipt of all papers, this Court required the Parties to submit supplemental briefi g
regarding the Motion to Compel, by November 26, 2013. (See Text Order, ECF No. 16). Plainti s
timely submitted a letter which stated that arbitration in India is in its initial stages, but is o
related to breach of contract claims and not the trademark infringement claims. (ECF No. 21 t

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1). Additionally, Plaintiffs filed a motion for preliminary injunction, which was denied as m

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on January 27, 2014. (Order, ECF No. 34).

II.

LEGAL STANDARD.
On a motion to dismiss and compel arbitration, the standard of review is the same as

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"standard used by district courts in resolving summary judgment motions pursuant to Fed. R. C
P. 56(c) ... inasmuch as the district court's order to arbitrate is in effect a summary disposition
the issue of whether or not there had been a meeting of the minds on the agreement to arbitrat "
Par-Knit Mills, Inc. v. Stockbridge Fabrics Co .. 636 F.2d 51, 54 n.9 (3d Cir. 1980); Basketb 1
Mktg. Co. v. Urbanworks Entm't, No. 04-3179, 2004 WL 2590506, at 3 (E.D.Pa. Nov. 10, 20
(noting that the summary judgment standard is appropriately applied to resolution ofthis issu
The moving party bears the burden of demonstrating that there are no genuine issues of mat

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fact and that it is entitled to judgment as a matter oflaw. Basketball Mktg. Co., 2004 WL 25905

,

at 3; Celotex Com. v. Catrett, 477 U.S. 317, 323 (1986) (citing Fed.R.Civ.P. 56( c)).
The Federal Arbitration Act ("FAA"), 9 U.S.C. § 1, et seq., permits district courts to iss e
orders to compel arbitration. "[U]pon being satisfied that the making of the agreement
arbitration or the failure to comply therewith is not in issue, the court shall make an or
directing the parties to proceed to arbitration in accordance with the terms of the agreement."
U.S.C. § 4. "The FAA establishes a strong federal policy in favor of compelling arbitration o r
litigation." Sandvik AB v. Advent Int'l Corp., 220 F.3d 99, 104 (3d Cir. 2000). "The presumpti
in favor of arbitration carries 'special force' when international commerce is involved."
Still, ''the District Court [must] ... first determine if there was indeed an arrangement

arbitrate." Id. at 105. If a district court fmds that the parties did not enter into a valid agreeme t
to arbitrate, the court must retain jurisdiction over the case. Id. at 107.
To compel arbitration, calls for a two-step inquiry into (1) whether a valid agreement o
arbitrate exists and (2) whether the particular dispute falls within the scope of that agreem t.
PaineWebber, Inc. v. Hartmann, 921 F.2d 507, 511 (3d Cir.1990), overruled on other grounds y
Howsam v. Dean Witter Reynolds, 537 U.S. 79, 85, 123 S.Ct. 588, 154 L.Ed.2d 491 (2002). Wh n
a dispute consists of several claims, the court must determine on an issue-by-issue basis whet
a party bears a duty to arbitrate. See Painewebber Inc. v. Hoftnann, 984 F.2d 1372, 1376-77 ( d
Cir.1993).
Similarly, when determining both the existence and the scope of an arbitration agreement, th e
is a presumption in favor of arbitrability. "[A]n order to arbitrate the particular grievance sho
not be denied unless it may be said with positive assurance that the arbitration clause is
susceptible of an interpretation that covers the asserted dispute." Tri

eMu . Co. v. Niles Au o

Corp., 401 F.3d 529, 532 (3d Cir. 2005) quoting AT & T Technolo ·es Inc. v. Communicati
Workers of America, 475 U.S. 643, 650, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986).

III.

ANALYSIS.
The Parties agree that a valid agreement to arbitrate exists as they have already be

arbitration in India. Thus, the issue before this Court becomes whether or not the tradem
infringement claims fall within the scope of the Arbitration Clause. The Court finds that
breadth of the Arbitration Clause encompasses any claims of or related to trademark infringem
in breach of the Master License Agreement, and thus, the Parties shall arbitrate these claims.

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The Arbitration Clause in the Master License Agreement provides for arbitration of "a y
dispute/claim or contentions in respect of or arising out of or relating in any matter to the provisi

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ofth[e] agreement." (Def. Br., ECF No. 10-2 at 3). Further, the Master License Agreement asse s
the rights and obligations of the Parties with respect to trademark at issue, on numerous occasio s.
@ at Ex. B). 2 Plaintiffs argue that the Arbitration Clause is silent as to trademark issues

addresses only the claims arising out of or relating to the Master License Agreement. (Pl. 0

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ECF No. 12 at 3). The Court finds this argument unpersuasive.
The Supreme Court decision in AT & T Technolo ies Inc. v. Commc'ns Workers of
is instructive, explaining that the presumption of arbitrability is particularly applicable where

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clause is broad, such as when the clause provided for arbitration of "any differences arising
respect to the interpretation of this contract or the performance of any obligation hereunder.... "

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U.S. 643, 650, 106 S. Ct. 1415, 1419, 89 L. Ed. 2d 648 (1986). The Court continued by stat g
that in such cases, "[i]n the absence of any express provision excluding a particular grievance fr m
arbitration, we think only the most forceful evidence of a purpose to exclude the claim fr m
arbitration can prevail." Id. Quoting Steelworkers v. Warrior & GulfNavigation Co., 363 U.S. at
584-585, 80 S.Ct., at 1353-1354.
There is no evidence in this case that the Arbitration Clause was meant to apply to

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entirety of the Master License Agreement but with the exclusion of the related, and perhaps e n
anticipated, trademark issues. In fact, the sheer entanglement of the Master License Agreem nt
with the trademark "Sankalp" is enough to indicate the Arbitration Clause was designed to
incorporate any trademark infringement claims that may arise.

2 For

instance, stating "authorized M/s SANKALP RECREATION PVT. LTD to use and give license to use the
name "Sankalp" and "by entering into this agreement to use said trade mark and trading style for valuable
consideration ... " (ECF No. 10-1, Ex. Bat 3).

Plaintiffs' also argue that "it is unclear if an Indian arbitrator could give Plaintiffs
complete relief they seek in this case". (Pl. Opp., ECF No. 12 at 4). Plaintiffs rely on the provisi
in the Master License Agreement, drafted by Plaintiffs, 3 stating "This agreement shall be govern
by the prevailing laws of India". (Id.). However, Plaintiffs fail to provide the Court with any c e
law suggesting that completeness of relief should be considered as a factor in compelli g
arbitration. Plaintiffs only suggest that a judgment by a foreign court cannot be used to invalid e
U.S. trademark rights. (lgJ.4 But the Supreme Court suggests otherwise in Scherk v. Alb
Culver Co., stating "a contractual provision specifying in advance the forum in which dispu s
shall be litigated and the law to be applied is, therefore, an almost indispensable precondition o
achievement of the orderliness and predictability essential to any international
transaction." 417 U.S. 506, 516, 94 S. Ct. 2449,2455-56,41 L. Ed. 2d 270 (1974).
In Scherk, an American company, Alberto-Culver, purchased various interrelated busin s
enterprises, organized under the laws of Gennany and Liechtenstein, as well as the rights held
those enterprises in certain trademarks, from a German citizen who (at the time of trial) resided
Switzerland. Scherk 417 U.S., at 516-517, 94 S.Ct., at 2455-2456. While the sales contr
contained a provision for arbitration before the International Chamber of Commerce in Paris
"any controversy or claim [arising] out of this agreement or the breach thereof:" Alberto-Cui
brought suit against Scherk in a Federal District Court in Illinois. Id. Alberto-Culver alleged,
part, that Scherk fraudulently misrepresented the status of the trademarks as unencumbered.
The Supreme Court enforced the arbitration clause, even while assuming for purposes of
decision that the controversy would be nonarbitrable under the holding of Wilko5 had it arisen

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See Def. Reply, ECF No. 13 at 1.
See J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition§ 29:36.50 (4th ed.).
5
See Wilko v. Swan 201 F.2d 439,444 (CA2 1953), rev'd, 346 U.S. 427, 74 S.Ct. 182,98 LEd. 168 (1953).

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of a domestic transaction. Id. In its holding, the Supreme Court emphasized: "A parochial refu ial
by the courts of one country to enforce an international arbitration agreement would not

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frustrate these purposes, but would invite unseemly and mutually destructive jockeying by

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parties to secure tactical litigation advantages.... [It would] damage the fabric of intematio ial
commerce and trade, and imperil the willingness and ability of businessmen to enter i o
international commercial agreements." ld. Considering Plaintiffs were in fact the drafters of

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Master License Agreement, within which Indian law is chosen, it is unclear that the partie

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intended to arbitrate the trademark claims in this case as well.

IV.

CONCLUSION.

Based on the foregoing, this Court recommends that Defendants' Motion to Compel pe
GRANTED and the Parties be ordered to arbitrate all claims.

SO ORDERED

JOSjPH1A. DICKSON, U.S.M.J.

cc:

Honorable Jose L. Linares , U.S.D.J.