Vesta Corporation v. Amdocs Management Limited et al

Filing 255

OPINION & ORDER: The Court denies Defendants' Motion to Dismiss 236 . See 17-page opinion & order attached. Signed on 6/16/2016 by Judge Marco A. Hernandez. (mr)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON

VESTA CORPORATION,
No. 3:14-cv-1142-HZ
Plaintiff,
OPINION & ORDER
v.
AMDOCS MANAGEMENT
LIMITED and AMDOCS, INC.,
Defendants.
Erick J. Haynie
Daniel T. Keese
Joanna T. Perini-Abbott
Stephen English
Julia E. Markley
Meredith Price
PERKINS COIE, LLP
1120 NW Couch Street, 10th Floor
Portland, OR 97209
Andrew Ong
ORRICK, HERRINGTON & SUTCLIFFE LLP
1000 Marsh Road
Menlo Park, CA 94025
Attorneys for Plaintiff
1 – OPINION & ORDER

Andrew G. Klevorn
Bruce G. Vanyo
Yonaton M. Rosenzweig
Christina Lucen Costley
KATTEN MUCHIN ROSENMAN, LLP
2029 Century Park East, Suite 2600
Los Angeles, CA 90067
Kristin J. Achterhof
Meegan I. Maczek
Richard H. Zelichov
KATTEN MUCHIN ROSENMAN, LLP
525 West Monroe Street
Chicago, IL 60661
Joshua L. Ross
Robert A. Shlachter
Timothy S. DeJong
STOLL STOLL BERNE LOKTING & SHLACHTER, PC
209 SW Oak Street, Fifth Floor
Portland, OR 97204
Attorneys for Defendants

HERNÁNDEZ, District Judge:
Defendants Amdocs Management Limited and Amdocs, Inc. move to dismiss Plaintiff
Vesta Corporation’s Third Amended Complaint. Defendants’ motion is denied.
FACTUAL BACKGROUND
Plaintiff is an electronic payments solution and fraud prevention technology company.
TAC Intro, ECF 222. Defendants are telephone billing software and services companies. Id.
Both Plaintiff and Defendants provide services to national and international mobile phone
network operators (MNOs). Id. at ¶¶ 7-8. Until recently, Defendants were not providers of
payment solutions. Id. at ¶ 10.
Over the years, the parties have shared many of the same customers because MNOs
generally require both a payment solution and a billing platform to serve their end-users. Id. at ¶
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11. Beginning in 2009, the parties’ relationship became more strategic. Id. at ¶ 12. The parties
began working together to integrate their services and platforms in order to appeal to their shared
customer base. Id. In addition, since 2010, Defendants twice approached Plaintiff about the
possibility of Defendants acquiring Plaintiff. Id.
In the course of jointly collaborating on marketing and the possibility of acquisition, the
parties shared detailed technical information with each other. Id. at ¶ 13. Plaintiff shared
information with Defendants including proprietary information about Plaintiff’s payment
solution (the “Confidential Solutions Methods”) and detailed financial, pricing, profitability, and
statistical information about the prevalence of fraudulent payment transactions in the prepaid
mobile device marketplace and how Plaintiff uses fraud data to price its payment solutions (the
“Confidential Risk Information”). Id. at ¶¶ 20, 49.
Given the proprietary nature of such information, the parties entered into a series of
confidentiality and non-disclosure agreements (the “NDAs”). Id. at ¶ 13. The first such NDA
was signed on or about October 18, 2006. Id. at ¶ 14. Additional NDAs were entered into on
June 24, 2009; March 31, 2010; and July 3, 2012. Id. In addition, every time one of Defendants’
employees visited Plaintiff’s headquarters, the employee had to sign-in and agree that all of the
information acquired while on the premises was confidential and proprietary to Plaintiff. Id. ¶ 18
(describing the “Sign-In NDAs”).
The first round of acquisition discussions took place in 2010. Id. at ¶ 25. In connection
with these discussions, Plaintiff shared proprietary information, including detailed financial,
pricing, and profitability data that had not been previously shared. Id. at ¶ 23. While the initial
acquisition attempt fell apart in early April 2010, the parties continued to work together on
jointly pitching Plaintiff’s payment solution proposal to MetroPCS, a large MNO now affiliated
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with T-Mobile. Id. at ¶ 27. The parties collaborated on a joint proposal providing for Plaintiff to
supply a payment solution to MetroPCS that would be integrated into Defendants’ billing
platform, which MetroPCS was already using. Id. at ¶¶ 27, 29. Ultimately, the joint pitch to
MetroPCS was not successful in adding Plaintiff’s payment solution. Id. at ¶ 33.
In the spring of 2012, the parties again discussed the possibility of acquisition. Id. at ¶ 36.
Once again, Plaintiff shared confidential information with Defendants but the acquisition effort
was not successful. Id. at ¶¶ 40-41.
In July of 2013, Plaintiff learned that, during or shortly after the failed joint pitch to
MetroPCS, Defendants sold MetroPCS an integrated payment solution and billing platform,
thereby excluding Plaintiff from the sale. Id. at ¶ 34. Plaintiff claims that Defendants used
Plaintiff’s Confidential Solutions Methods and Confidential Risk Information to enter into an
exclusive contract to become the provider of the payment processing solution for the prepaid
wireless services of MetroPCS. Id. at ¶ 56. According to Plaintiff, there is no way that
Defendants could have built a payment solution for MetroPCS in such a short time frame without
using some significant portion of the confidential information provided to Defendants by
Plaintiff in connection with the MetroPCS collaboration project. Id. at ¶ 35.
Plaintiff further alleges that Defendants are actively marketing their “copycat payment
solution” to other potential buyers. Id. at ¶ 48. In March or April of 2014, Sprint (another MNO)
indicated to Plaintiff that it was considering migrating its prepaid wireless payment processing
solution from Plaintiff to an in-house solution. Id. at ¶ 58. However, in or about September 2014,
Plaintiff learned from Sprint that Sprint had changed its decision and, instead, selected
Defendants as Plaintiff’s replacement. Id. at ¶¶ 58-59. According to Plaintiff, Defendants used
their knowledge of Plaintiff’s Confidential Solutions Methods and Confidential Risk Information
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to displace Plaintiff and take over payment processing services for all of Sprint’s prepaid brands
(Sprint, Boost Mobile, Virgin Mobile, and Assurance). Id. at ¶ 60.
Plaintiff also alleges that Defendants used the confidential information they learned from
Plaintiff in order to underbid Plaintiff in a proposal to provide a single payment processing
solution for all of T-Mobile’s wireless services. Id. at ¶ 61. While Plaintiff ultimately won the
bid, it had to significantly lower its price to compete with Defendants and avoid being foreclosed
from the marketplace. Id. at ¶ 63.
PROCEDURAL BACKGROUND
Plaintiff filed this action in state court in June of 2014 and Defendants removed the case
to federal court on July 17, 2014. Notice of Removal, ECF 1. The original complaint brought
claims of breach of contract, theft of trade secrets, and fraud. Compl., ECF 1-1. On January 13,
2015, this Court dismissed Plaintiff’s fraud claim. Opinion & Order, Jan. 13, 2015, ECF 42.
On April 7, 2015, Plaintiff filed a First Amended Complaint (FAC), in which Plaintiff
made several changes to the original complaint. FAC, ECF 52. Plaintiff omitted the fraud claim,
added three antitrust claims, and made changes to the damages allegations. Id. In September of
2015, this Court granted Defendants’ motion to dismiss Plaintiff’s antitrust claims. Opinion &
Order, Sept. 3, 2015, ECF 97.
On December 2, 2015, this Court granted Plaintiff leave to file an amended complaint to
remove an inaccurate statement in the First Amended Complaint. Order, Dec. 2, 2015, ECF 146.
In that order, the Court noted:
Plaintiff’s proposed complaint still includes claims which were dismissed by this Court
on September 3, 2015. . . Plaintiff is directed to file an amended complaint which
accurately reflects the claims that remain in this case within 7 days of this Order.
Id.
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On December 9, 2015, Plaintiff filed a Second Amended Complaint (SAC) in which
Plaintiff removed the inaccurate statement in ¶ 40 of the FAC and removed all of the antitrust
claims. However, Plaintiff did not remove all of the factual allegations relating to the antitrust
claims, which spurred Defendants to file a motion to strike allegations in the SAC. Mot. Strike,
Dec. 21, 2015, ECF 159.
On December 29, 2015, the Court entered an order striking several paragraphs of the
SAC because Plaintiff did not have leave of Court or consent of Defendants to convert its prior
antitrust allegations into trade secret misappropriation allegations. Order, Dec. 29, 2015, ECF
162. Plaintiff was directed to file an amended complaint within 10 days that complied with the
order and removed “factual allegations and claims that were included in Plaintiff’s First
Amended Complaint as part of Plaintiff’s now-dismissed antitrust claims.” Id. Plaintiff was
further directed that, if it wished to amend its complaint in any other way, it must seek leave to
amend pursuant to Rule 15. Id. Pursuant to the Court’s order, Plaintiff filed a Corrected Second
Amended Complaint (CSAC) on January 8, 2015. CSAC, ECF 166.
On April 1, 2014, the Court granted Plaintiff leave to amend to file a Third Amended
Complaint (TAC). Plaintiff filed the TAC, which expands the allegations of damages to include
lost profits and royalties stemming not only from the MetroPCS deal, but also Sprint and TMobile accounts. Defendants now move to dismiss the TAC to the extent it includes new
allegations regarding Sprint, T-Mobile, and Vodafone.
STANDARDS
I.

Rule 10(b)
Where a plaintiff's claims are founded upon separate transactions or occurrences, they are

properly “stated in a separate count ... [because] a separation facilitates the clear presentation of
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the matters set forth.” Bautista v. Los Angeles Cty., 216 F.3d 837, 840-41 (9th Cir. 2000)
(quoting Fed. R. Civ. P. 10(b) and citing James Wm. Moore, et al., Moore's Federal Practice §
10.03(2)(a) (3d ed. 1997)). “Separate counts will be required if necessary to enable the defendant
to frame a responsive pleading or to enable the court and the other parties to understand the
claims.” Moore, supra, § 10.03 (2)(a). “Courts have required separate counts where multiple
claims are asserted, where they arise out of separate transactions or occurrences, and where
separate statements will facilitate a clear presentation.” Id. (citing 5 Charles Alan Wright &
Arthur R. Miller, 5A Federal Practice and Procedure § 1324 (3d ed.)).
“In such cases, separate counts permit pleadings to serve their intended purpose to frame
the issue and provide the basis for informed pretrial proceedings.” Id. “Experience teaches that,
unless cases are pled clearly and precisely, issues are not joined, discovery is not controlled, the
trial court's docket becomes unmanageable, the litigants suffer, and society loses confidence in
the court's ability to administer justice.” Id. (quoting Anderson v. District Bd. of Trustees, 77
F.3d 364, 367 (11th Cir. 1996)).
II.

Rule 12(b)(6)
A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) tests the sufficiency

of the claims. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). “All allegations of material
fact are taken as true and construed in the light most favorable to the nonmoving party.” Am.
Family Ass'n, Inc. v. City & Cnty. of S.F., 277 F.3d 1114, 1120 (9th Cir. 2002). However, the
court need not accept conclusory allegations as truthful. See Warren v. Fox Family Worldwide,
Inc., 328 F.3d 1136, 1139 (9th Cir. 2003) (“[W]e are not required to accept as true conclusory
allegations which are contradicted by documents referred to in the complaint, and we do not
necessarily assume the truth of legal conclusions merely because they are cast in the form of
7 – OPINION & ORDER

factual allegations.”) (internal quotation marks, citation, and alterations omitted). Rather, to state
a plausible claim for relief, the complaint “must contain sufficient allegations of underlying
facts” to support its legal conclusions. Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011).
A motion to dismiss under Rule 12(b)(6) will be granted if a plaintiff alleges the
“grounds” of his “entitlement to relief” with nothing “more than labels and conclusions, and a
formulaic recitation of the elements of a cause of action[.]” Bell Atl. Corp. v. Twombly, 550
U.S. 544, 555 (2007). “Factual allegations must be enough to raise a right to relief above the
speculative level on the assumption that all the allegations in the complaint are true (even if
doubtful in fact)[.]” Id. (citations and footnote omitted).
To survive a motion to dismiss, a complaint “must contain sufficient factual matter,
accepted as true, to state a claim to relief that is plausible on its face[,]” meaning “when the
plaintiff pleads factual content that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)
(internal quotation marks omitted). A complaint must contain “well-pleaded facts” which
“permit the court to infer more than the mere possibility of misconduct[.]” Id. at 679.
III.

Rule 12(b)(1)
Where the court lacks subject-matter jurisdiction, the action must be dismissed. Fed. R.

Civ. P. 12(b)(1). A motion to compel arbitration is appropriately raised pursuant to Rule
12(b)(1). See Geographic Expeditions. Inc. v. Estate of Lhotka ex rel. Lhotka, 599 F.3d 1102,
1104 (9th Cir. 2010). In considering a Rule 12(b)(1) motion, the court may consider evidence
outside the pleadings to resolve factual disputes. Robinson v. United States, 586 F.3d 683, 685
(9th Cir. 2009).

8 – OPINION & ORDER

DISCUSSION
Defendants argue that this Court should dismiss the TAC because (1) the TAC fails to
comply with Federal Rule of Civil Procedure 10(b); (2) the TAC fails to state a claim for breach
of contract or theft of trade secrets in connection with the parties’ dealings with Sprint and TMobile; and (3) Plaintiff’s allegations regarding Sprint, T-Mobile, and Vodafone are subject to
arbitration. For the reasons that follow, Defendants’ arguments are unavailing.
Before delving into the specifics of each of Defendants’ arguments, the Court notes a
fundamental difference between how Defendants and this Court characterize Plaintiff’s TAC.
Defendant contends that Plaintiff has added “new claims” related to Sprint, T-Mobile, and
Vodafone. Defs.’ Mot. Dismiss 6, ECF 236. The Court disagrees. While Plaintiff’s complaints
have evolved over the course of almost two years of litigation, the essential claims of breach of
contract and theft of trade secrets have remained the same. When the case was filed in June of
2014, Plaintiff alleged that Defendants had obtained confidential solution methods and risk
information over the course of acquisition discussions and collaborating on a joint pitch to
MetroPCS, and then had used such information, in violation of the parties’ NDAs, to secure the
MetroPCS business without involving Plaintiff. The complaint pled damages as to the lost
revenue on the MetroPCS account as well as “other damages . . . including lost revenue on other
accounts.” Compl. ¶¶ 70, 77, 86, 97, ECF 8.
During the course of litigation, the business dealings with Sprint and T-Mobile at issue in
the present complaint developed. Now, Plaintiff adds allegations that Defendants used their
knowledge of this confidential information to replace Plaintiff’s provision of services to Sprint
and to threaten Plaintiff’s business with T-Mobile. Thus, Plaintiff contends that it has now
suffered damages not only due to lost business with MetroPCS but also due to lost profits and
royalties on the Sprint and T-Mobile accounts.
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As this Court explained in its Opinion & Order granting Plaintiff leave to file the TAC,
Plaintiff is now, for the first time, expressly seeking to include the Sprint and T-Mobile
allegations as part of the breach of contract and theft of trade secrets claims. Opinion & Order,
April 1, 2016, ECF 220. Plaintiff’s additional allegations, however, are not “new claims.”
Instead, they expand the existing claims to encompass a wider range of behavior and, thus,
potential damages.
Finally, Defendants assert that Plaintiff brings claims related to Vodafone. See Defs.’
Mot. 6, ECF 236 (“Vesta’s claims related to Sprint, T-Mobile, and Vodafone are subject to
arbitration.”). Vodafone is mentioned only once in the TAC as part of an allegation that “[a]
substantial portion of the confidential information provided to Amdocs by Vesta was provided in
connection with joint projects for specific MNO customers shared by Amdocs and Vesta, such as
MetroPCS (as discussed further below), Vodafone, T-Mobile, and Boost Mobile.” TAC ¶ 21.
The TAC does not allege any damages suffered in connection with a Vodafone account. The
Court does not find any plausible reading of the TAC under which it would conclude that
Plaintiff brings independent claims as to Vodafone.
I.

Rule 10(b)
Defendants ask the Court to dismiss the TAC pursuant to Federal Rule of Civil Procedure

10(b), which requires that “each claim founded on a separate transaction or occurrence . . . be
stated in a separate count,” if doing so would promote clarity. Defendants contend that Plaintiff’s
TAC adds two additional transactions—Defendants’ development of a payment solution for
Sprint and Defendants’ pitch to T-Mobile—without stating each transaction in a separate count
within the TAC’s claims. Defendants contend that the allegations “just appear out of nowhere in
the middle of the Third Amended Complaint, thereby failing to provide Amdocs with fair notice
as to what it allegedly did wrong in connection with Sprint and T-Mobile.” Defs.’ Mot. 12.
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The Court agrees with Plaintiff that Defendants “invent[] confusion where there is none.”
Pl.’s Opp. 18, ECF 241. The TAC sets out two claims—breach of contract and theft of trade
secrets. The essential allegations in the TAC remain the same as in all of the previous iterations
of the complaint—Plaintiff alleges that Defendants misappropriated its confidential and
proprietary information, in “direct breach of the 2009 NDA and/or the 2012 NDA.” TAC ¶ 73(a),
80(a). As a result of Defendants’ alleged breach and theft of trade secrets, Plaintiff suffered lost
profits and royalties on various accounts, including MetroPCS, Sprint, and T-Mobile. Id. at ¶¶
75, 82, 92, 104.
The Court finds the TAC sufficiently clear to frame the issue and put Defendants on
notice as to the claims being brought against them. There is no need for Plaintiff to further
separate the claims.
II.

Rule 12(b)(6)
Defendants argue that Plaintiff fails to state a claim for breach of contract related to

Sprint or T-Mobile. Defendants contend that Plaintiff fails to identify the governing contract or
contractual provisions. Furthermore, Defendants contend that Plaintiff cannot rely on its
allegations regarding MetroPCS (which this Court already found sufficient to withstand a motion
to dismiss) to state a claim regarding Sprint and T-Mobile. Finally, Defendants argue that
Plaintiff fails to plead a cognizable damages claim with respect to Sprint or T-Mobile.
Defendants also argue that Plaintiff fails to state a claim for theft of trade secrets as to
Sprint or T-Mobile. Defendants contend that Plaintiff alleges only legal conclusions and that
Plaintiff has not pled any facts supporting a theory that Defendants had access to Plaintiff’s
Solution Methods or Risk Information relating to Sprint or T-Mobile.

11 – OPINION & ORDER

As explained at the beginning of this Opinion, the Court rejects Defendants’ proposed
interpretation of Plaintiff’s TAC. The Court reads the TAC to allege that Defendants breached
the 2009 and/or 2012 NDAs and stole trade secrets from Plaintiff. As a result, Plaintiff suffered
damages on various accounts, including MetroPCS, Sprint, and T-Mobile. Taking the facts as
alleged by Plaintiff, Plaintiff sufficiently states a claim for all of the reasons this Court already
explained in declining to dismiss Plaintiff’s breach of contract and theft of trade secrets claims
over a year ago. See Opinion & Order, January 13, 2015, ECF 42.
III.

Arbitration agreement
Defendants argue that the Court should dismiss or strike Plaintiff’s allegations related to

Sprint, T-Mobile, and Vodafone for lack of subject matter jurisdiction due to the parties’
agreement to arbitrate.
The Federal Arbitration Act, 9 U.S.C. §§ 1–16 (“FAA”), removes the court's subject
matter jurisdiction to hear a claim when there is a valid, enforceable arbitration clause.
Therefore, Defendants’ motion to dismiss is “one means to raise its arbitration defense. In effect,
[Defendants’] motion is a petition to this court within the meaning of § 4 of the FAA.” Rogue v.
Applied Materials, Inc., No. 03:03–cv–1564–ST, 2004 WL 1212110, at *4 (D. Or. Feb. 20,
2004).
The FAA limits the district court's role to determining whether a valid arbitration
agreement exists, and whether the agreement encompasses the disputes at issue. Nguyen v.
Barnes & Noble Inc., 763 F.3d 1171, 1175 (9th Cir. 2014). Written agreements to arbitrate
arising out of transactions involving interstate commerce “shall be valid, irrevocable, and
enforceable, save upon such grounds as exist at law or in equity for the revocation of any
contract.” 9 U.S.C. § 2. If the issue is referable to arbitration under the agreement, then the court
12 – OPINION & ORDER

must direct the issue to arbitration and stay the trial. 9 U.S.C. § 3. An agreement to arbitrate is to
be “rigorously enforce[d.]” Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 221 (1985).
Courts strongly favor arbitration and broadly construe arbitration clauses. E.g.,
Mitsubishi Motors Corp. v. Soler Chrysler–Plymouth, Inc., 473 U.S. 614, 626 (1985) (“any
doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration”)
(internal quotation marks omitted); Simula, Inc. v. Autoliv, Inc., 175 F.3d 716, 719 (9th Cir.
1999) (“The standard for demonstrating arbitrability is not high.”).
While public policy favors arbitration, such a presumption does not apply if the
contractual language is clear that arbitration of a particular controversy is not within the scope of
the arbitration provision. Mundi v. Union Sec. Life Ins. Co., 555 F.3d 1042, 1044-45 (9th Cir.
2009); see also United Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582
(1960) (“[A]rbitration is a matter of contract and a party cannot be required to submit to
arbitration any dispute which he has not agreed so to submit.”) In other words, the policy
favoring arbitration cannot displace the necessity for a voluntary agreement to arbitrate. Id.
a. Scope of the arbitration provision
Defendants contend that the entire TAC is subject to dismissal pursuant to the arbitration
provision contained in a Memorandum of Understanding (“MOU”) the parties signed on
September 30, 2010. Rosenzweig Decl. Ex. A (“MOU”), ECF 238. However, Defendants move
only to dismiss Plaintiff’s “new claims” as to Sprint, T-Mobile, and Vodafone. Defendants
explain: “Amdocs is only moving to dismiss with respect to the non-MetroPCS claims in light of
the Court’s extensive experience and understanding of that claim.” Defs.’ Mot. 9, n.3; see also
Defs.’ Reply 7, ECF 250 (reiterating that Defendants do not invoke the arbitration provision with
respect to the claims involving MetroPCS).
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The parties entered into the MOU “to provide the Parties with a commercial framework
for marketing and reselling [Plaintiff’s] and its Affiliates’ services . . . by [Defendants] and its
Affiliates to their respective customers and prospective customers.” MOU at 3. Thirty-nine
customers and prospective customers, including Vodafone, MetroPCS, Sprint, and T-Mobile,
were listed in an attachment to the MOU. Id. at 12-13; see also TAC ¶ 60 (noting that Boost
Mobile is a Sprint brand). The attached document stated: “[Plaintiff] retains the right to
determine if [Defendants] will be involved in any sales opportunity. Parties will agree in writing
via an Opportunity Registration before joint selling activity is undertaken.” Id.
The MOU provided a framework by which the parties could opt-in, on a customer-bycustomer basis, to have Defendants sell or recommend Plaintiff’s services in exchange for a
percentage of Plaintiff’s profits from that customer, also referred to as an “end-user.” MOU §
1.1. The MOU detailed “two contracting models”: resale and referral. MOU § 3.1.1. In a resale,
Plaintiff’s services would be provided to the end-user pursuant to a written service agreement
between Defendants and the end-user. In a referral, Defendants would refer the end-user to
Plaintiff for services and the written agreement would be executed between Plaintiff and the enduser. MOU § 1.2. In either case, the written agreement would include the services’ terms and
provisions as approved by Plaintiff “in its sole reasonable discretion.” Id. The MOU also
provided for the amount of the service fees that Defendants would receive, depending on
whether the transaction was a resale or referral. Id. at Sched. B.
By the terms of the MOU, prior to engaging an end-user in a sales process, the parties
would execute an “Opportunity Registration Form.” Id. at § 3.2.1. A sample form was attached
to the MOU. Id. at § 3.2.2. The form provided for the terms jointly offered to the end-user,
including services, roles, and services fees. Id. at Sched. C.
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The MOU contained a “Confidentiality” provision, which stated “that exchange and
treatment of confidential information shall be treated in accordance with the Non-Disclosure
Agreement between [the parties] dated June 24, 2009.” Id. at § 10.1.
The MOU also provided a “dispute resolution” process for “any dispute under this
MOU.” MOU § 10.9. The dispute resolution process provided that:
§ 10.9.1. Either party may apply ex part[e] to courts having jurisdiction in the matter to
obtain an injunction to prevent disclosure of its confidential information.
§ 10.9.2. Notwithstanding Section 10.9.3, intellectual property indemnification claims for
court proceedings initiated by a third party against either Party (or its Affiliate) may be
brought in the court in which such Party (or its Affiliate) is being sued.
§ 10.9.3. For all other disputes arising under or in connection with this MOU, these
disputes shall be exclusively referred to and finally resolved by binding arbitration
conducted in accordance with the rules of the American Arbitration Association
(“AAA”). . . .The arbitration award and/or determination shall be final and binding and
judgment may be entered thereon in any court of competent jurisdiction.
MOU at 8-9 (emphasis added).
Defendants contend that Plaintiff’s allegations in the TAC regarding Sprint, T-Mobile,
and Vodafone “arise under” or are “in connection with” the MOU and, thus, are subject to
arbitration. According to Defendants, the MOU establishes a framework to address the parties’
rights before, during, and after a joint pitch to customers such as Sprint, T-Mobile, and
Vodafone. Furthermore, the MOU incorporates confidentiality duties from the 2009 NDA, which
is the “umbrella confidentiality agreement governing all of the parties’ communications,” as
referenced in the TAC. TAC ¶ 17.
The Court recognizes that the parties chose broad language in the MOU to describe the
kinds of disputes the arbitration provision would encompass. The use of “arising under or in
connection with this MOU” requires the Court interpret the language broadly and apply the
arbitration provision to “every dispute between the parties having a significant relationship to the
15 – OPINION & ORDER

contract and all disputes having their origin or genesis in the contract.” Simula, 175 F.3d at 721
(“Every court that has construed the phrase ‘arising in connection with’ in an arbitration clause
has interpreted that language broadly.”) To require arbitration, Plaintiff’s factual allegations need
only “touch matters” covered by the MOU and all doubts are to be resolved in favor of
arbitrability. Id.
However, no matter how broad the parties framed the language in the MOU’s arbitration
provision and no matter how “emphatic [the] federal policy [is] in favor of arbitral dispute
resolution,” Toyo Tire Holdings Of Americas Inc. v. Cont'l Tire N. Am., Inc., 609 F.3d 975, 980
(9th Cir. 2010), nothing changes the basic principle that an arbitration provision does not apply
to a dispute not within the scope of the provision. See Mundi, 555 F.3d at 1044-45. Here, the
parties’ MOU established a commercial framework for how the parties would work together to
pitch Plaintiff’s services to potential clients. The parties did not, and could not, actually engage a
client, however, without executing an Opportunity Registration Form. MOU § 3.2.1. The fact
that the parties include an attachment which listed potential clients does not mean that every
client listed in that attachment was automatically subject to the terms of the MOU.
The dispute that has arisen between the parties as to Sprint and T-Mobile relates to
conduct allegedly taken by Defendants that had nothing to do with this MOU. The parties never
executed an Opportunity Registration Form regarding Sprint or T-Mobile. Fieldhouse Decl. ¶ 2,
ECF 242. Plaintiff’s allegation is that Defendants took actions to secure or attempt to secure
Sprint and T-Mobile’s business, not as a resale or referral in partnership with Plaintiff, but as a
replacement of Plaintiff. Such conduct cannot be said to have any connection to the MOU, nor
did it arise under the MOU. Accordingly, the dispute regarding Sprint and T-Mobile is not
subject to the arbitration provision.
16 – OPINION & ORDER

As to Vodafone, it appears based on the parties’ arguments that the parties may have
executed an Opportunity Registration Form. However, as discussed at the beginning of this
Opinion, the Court fails to see how the TAC can be construed to state an independent claim
regarding Vodafone, such that there would be any dispute to refer to arbitration. Most
importantly, nowhere does Plaintiff allege that it suffered any damages due to Defendants’
behavior in relation to Vodafone.
b. Waiver of arbitration
Plaintiff contends that, even if the allegations regarding Sprint and T-Mobile are
arbitrable, Defendants waived their right to compel arbitration. Because the Court finds that the
allegations regarding Sprint and T-Mobile are not subject to the arbitration provision, there is no
need to reach the waiver argument.
CONCLUSION
The Court denies Defendants’ Motion to Dismiss [236]
IT IS SO ORDERED.

Dated this ____________day of ________________________, 2016.

________________________________________________
MARCO A. HERNÁNDEZ
United States District Judge

17 – OPINION & ORDER