LENOX CORPORATION v. BLACKSHEAR et al
MEMORANDUM AND/OR OPINION. SIGNED BY HONORABLE ANITA B. BRODY ON 12/22/2016. 12/22/2016 ENTERED AND COPIES VIA ECF.(mo, )
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
ROGER W. RAWLS,
December 22, 2016
Anita B. Brody, J.
Plaintiff Lenox Corporation (“Lenox”) brings suit against Defendants Thomas
Blackshear, Roger W. Rawls, Blackshear Enterprises, Inc., and Keepsakes and Collectables,
LLC1 alleging trademark infringement, unfair competition, and false advertising in violation of
the Lanham Act, 15 U.S.C. § 1051 et seq. Lenox also brings several state law claims. Subsequent
to Lenox filing the Complaint, Blackshear initiated an arbitration action in California alleging
similar causes of action. Blackshear moves to stay this action pending the outcome of arbitration.
Lenox moves to enjoin the arbitration to allow this litigation to proceed. I exercise jurisdiction
over this dispute pursuant to federal question jurisdiction, 28 U.S.C. §§ 1331 and 1338, and
supplemental jurisdiction, 28 U.S.C. § 1367.
Thomas Blackshear is a celebrated American artist whose art depicts African American
Defendants are collectively referred to as “Blackshear” unless otherwise indicated.
themes and characters. He conducts business through Blackshear Enterprises, Inc., a Colorado
corporation with its principal place of business in Colorado Springs, Colorado. Blackshear
works with Roger W. Rawls, a Georgia resident who sells products through Keepsakes and
Collectables, LLC, a limited liability company operating in Georgia.
Sometime in the 1990s, Blackshear first contracted to sell his figurine designs to Willitts
Designs International (“Willitts”).2 Willitts and Blackshear engaged in a productive business
relationship in which Blackshear provided designs and artwork to Willitts, who in turn produced
and sold figurines and other collectible items based upon those designs. As part of that
relationship, Blackshear served as representative of a product line entitled “Thomas Blackshear’s
Ebony Visions,” signed collectible figurines from the line, attended product events, and collected
royalties from the sale of Willitts’ products.
In June 1999, in furtherance of their arrangement and pursuant to the trademark
registration process, Blackshear entered into a “Consent to Use and Registration of Name”
agreement (the “Consent Agreement”) with Willitts. In this agreement, Blackshear assented to
the use and registration by Willitts of his name as a trademark in connection with the sale of
figurines and other items. Thereafter, Willitts registered the mark, “Thomas Blackshear’s Ebony
Visions,” (the “Ebony Visions Mark”) with the United States Patent and Trademark Office
(“USPTO”). The Consent Agreement was appended to each of two trademark applications.3
Blackshear continued to contract with Willitts, providing design services to Willitts and its
sculptors for the “Thomas Blackshear’s Ebony Visions” line of products. Willitts subsequently
Neither party provides documentation of when their relationship began. See infra note 4.
There are two registration applications and approvals for “Thomas Blackshear’s Ebony Visions.” The
trademark applications are listed as Ser. No. 75,756,912, filed on July 20, 1999, and Ser. No. 75,756,916, filed on
July 21, 1999. The corresponding registration numbers are 2,565,712 and 2,443,448. Both registrations are for
“Thomas Blackshear Ebony Visions,” one for the use of the Mark with Figurines and Sculptures made of Resin, and
the other for the use of the Mark with Collector Plates and Figurines made from other materials. See Exs. B and C,
Pl. Lenox Corp.’s Mot. to Enjoin Arbitration, ECF No. 19.
marketed and sold these products under the trademark.
In 2004,4 Blackshear and Willitts’ relationship was memorialized in an Amended and
Restated Design Services and Compensation Agreement (“DSA”). DSA, attached as Ex. A to
Defs.’ Mot. to Stay, ECF No. 9. Under the DSA, Blackshear agreed to provide concepts for and
facilitate the design of figurines, accessories, jewelry, dolls, collectors’ plates, and ornaments
based on his artwork. He agreed these designs would become products, made by Willitts, to be
sold under the “Thomas Blackshear’s Ebony Visions” trademarks.5 The DSA confirmed
Willitts’ rights in the Ebony Visions Mark:
Designer6 shall acknowledge Company’s7 exclusive rights in the Property and the
Trademarks and acknowledges that the Property and/or Trademark are owned by
Company. Designer shall not dispute or contest, directly or indirectly Company’s
exclusive right and title to the Property and/or Trademarks or the validity thereof.
DSA § 9.C.
The DSA contains a “Jurisdiction and Disputes” section. This section states:
All disputes arising out of this Agreement shall be submitted to mediation in
accordance with the rules of Arts Arbitration and Mediation Services [“AAMS”],
a program of California Lawyers for the Arts. If mediation is not successful is
[sic] resolving the entire dispute, any outstanding issues shall be submitted to
final and binding arbitration in accordance with the rules of that program. The
arbitrator’s award shall be final, and judgement may be entered upon it by any
court having jurisdiction thereof. If any party hereto is required to institute
arbitration to enforce its rights under this Agreement, or to have the meaning of
any of its terms and provision over which there is a dispute declared and
determined by arbitration, the prevailing party shall be entitled to reasonable
The 2004 Agreement made reference to a prior agreement, the “Design Services and Compensation
Agreement dated June 21, 1994,” noting that the parties “wish to extend the term of the Prior Agreement on the
terms and conditions set forth in this Amended and Restated [DSA].” Neither party has provided a copy of that
original agreement, but both agree that the 2004 version is the operative contract. See Tr. of Mot H’rg 6:3-10,
September 7, 2016.
There are three other trademarks listed in the 2004 Design Services Agreement: “Thomas Blackshear,”
“The Blackshear Circle,” and “The Blackshear Jamborree Parade.” See Schedule A, DSA, attached as Ex. A to
Defs.’ Mot. to Stay, ECF No. 9. Although Lenox asserts that they own three of those trademarks, Am. Compl. ¶ 27,
both parties agreed on the record at the September 7, 2016 Motion hearing that the only trademark in dispute is
“Thomas Blackshear’s Ebony Visions.” Tr. of Mot. H’rg 3:9-5:7, September 7, 2016.
The preamble to the agreement identifies Thomas Blackshear as “DESIGNER.”
The preamble to the agreement identifies Willitts Designs International, Inc., as “COMPANY.”
attorney’s fees as awarded by the arbitrator in addition to all other recoverable
costs and damages.
DSA § 17.B. Section 17.C adds: “Both parties shall have the right to seek assistance with
disputes arising solely out of this Agreement using binding arbitration and/or mediation.”
DSA § 17.C. The DSA also contains a choice of law provision that states that it is
“governed in accordance with the laws of the State of California.” DSA § 17.A.
In March 2009, Lenox, a Delaware corporation with its principal place of business in
Bristol, Pennsylvania, acquired Willitts’ assets through an Asset Purchase Agreement, pursuant
to an order of the Bankruptcy Court in the Southern District of New York. The assets Lenox
purchased included the Ebony Visions Mark and the Design Services Agreement with
Blackshear. According to that order, Lenox acquired full title to the assets it purchased, free and
clear of any and all liens, claims, interests, and encumbrances in the assets, including the Ebony
Visions Mark. See Order ¶ R, attached as Ex. 1 to Resp. to Mot. to Dismiss or Stay Pending
Arbitration, ECF No. 14. Lenox has been listed as the registered owner of the Ebony Visions
Mark since the 2009 asset purchase, and is the current owner of the Mark. See Trademark
Registration and Assignment Information from USPTO, attached as Exs. C and D to Pl. Lenox
Corp.’s Mot. to Enjoin Arbitration, ECF No. 19; Am. Compl. ¶ 33.
In 2013, Blackshear and Lenox decided to discontinue their relationship. On June 30,
2013, the DSA terminated. While Blackshear is no longer obliged to provide designs to Lenox,
Lenox continues to sell existing and new products under the Ebony Visions Mark. Lenox claims
that prior to and since the expiration of the DSA, Blackshear has taken various actions that have
diluted the Ebony Visions trademark and disrupted its commercial relationships. Lenox alleges
that beginning in 2012, Defendant Roger W. Rawls and his company, Defendant Keepsakes and
Collectibles, LLC, purchased 4,200 products from Lenox, the majority of which are from the
“Thomas Blackshear’s Ebony Visions” product line. Defendants together began selling these
products on their website, BlackshearOnline.com, without Lenox’s permission and without
identifying them as “Thomas Blackshear’s Ebony Visions” products. Lenox alleges that in March
2014, Blackshear published a statement to the relevant market—retailers, collectors, and other
target consumers of the Ebony Visions line—noting that the “19-year run of Ebony Visions by
Thomas Blackshear comes to an end.” Lenox alleges this statement directed customers to contact
Rawls via email at firstname.lastname@example.org if they need “figurines to complete [their]
Ebony Visions collection.” Am. Compl. ¶ 62, ECF No. 7.
Lenox further alleges that in July 2014, Blackshear issued a statement to customers
stating that he “did not participate in or approve [Lenox’s] redesigns and will not participate in or
approve future redesigns of his past Ebony Visions releases.” Lenox claims Blackshear stated
that he was not signing any Lenox items bearing the Ebony Visions name and that signatures on
certain products may not be genuine. Am. Compl. ¶ 75, ECF No. 7. Finally, Lenox alleges that in
late 2014 and early 2015, Blackshear designed and marketed two angel figurines through the
website https://www.blackgifts.com: (1) “The Sound of Victory” and (2) “Ready for Battle.”
Lenox asserts that these products are derivatives of a figurine designed for Lenox, “Sentinel
Angel,” and therefore interfere with Lenox’s marketing of “Sentinel Angel.” Am. Compl. ¶ 100103, ECF No. 7
Lenox alleges that Defendants’ actions have created confusion in the marketplace and
diluted Lenox’s trademark. Lenox asserts that Defendants, by representing Lenox’s trademarked
goods as their own and inviting customers to purchase these products from the Blackshearonline
website, have engaged in reverse passing off by selling Lenox’s trademarked products as their
own. On November 5, 2015, Lenox filed a complaint in this Court asserting ten claims: (1)
Unfair Competition in violation of 15 U.S.C. § 1125(a); (2) Unfair Competition in violation of
73 P.S. §201-2(4); (3) Trademark Infringement in violation of 15 U.S.C. §1125; (4) False
Advertising in violation of 15 U.S.C. §1125; (5) False Advertising in violation of Pennsylvania
common law; (6) Unfair Competition in violation of Pennsylvania common law; (7) Unjust
Enrichment requiring an accounting in violation of Pennsylvania common law; (8) Tortious
Interference with business relationships in violation of Pennsylvania common law; (9)
Conspiracy to tortuously interfere with business relationships in violation of Pennsylvania
common law; and (10) Trade Libel in violation of Pennsylvania common law. ECF No. 1. The
Complaint was amended on March 17, 2016. ECF No. 7.
Subsequent to the filing of Lenox’s complaint, Blackshear concluded he was also
aggrieved by their arrangement. He claims he was not paid royalties owed to him under the DSA.
He seeks to remedy this, as well as establish his ownership of the “Thomas Blackshear’s Ebony
Visions” trademark. On March 31, 2016, in conjunction with a motion to dismiss, Blackshear
and Defendants moved to stay this matter pending arbitration. ECF No. 9. Pursuant to Section
17.B of the DSA, they argue that this dispute arises out of that agreement and is therefore subject
to the arbitration provision. Next, on April 14, 2016, while the Motion to Stay was pending,
Blackshear initiated the arbitration proceeding before the Arts Arbitration and Mediation Service
(“AAMS”) in California. He asserted nine claims against Lenox: (1) Breach of Contract; (2)
Trademark Infringement under the Lanham Act; (3) False Endorsement under the Lanham Act;
(4) Unfair competition under Cal. Bus. & Prof. Code §17200; (5) False Advertising under Cal.
Bus. & Prof. Code §17500; (6) Unfair Competition under California common law; (7) Violation
of California Civil Code § 3344; (8) Violation of California common law right of publicity; and
(9) Declaration of Non-Liability to Respondent under Declaratory Judgment Act. See Demand
for Arbitration, attached as Ex. A to Pl. Lenox Corp.’s Mot. to Enjoin Arbitration, ECF No. 19.
Lenox moves to enjoin this ongoing arbitration. ECF No. 19.
The Federal Arbitration Act, 9 U.S.C. § 1 et seq., (“FAA”), “creates a body of federal
substantive law establishing and governing the duty to honor agreements to arbitrate disputes.”
Century Indem. Co. v. Certain Underwriters at Lloyd's, London, 584 F.3d 513, 522 (3d Cir.
2009). “Congress designed the FAA to overrule the judiciary’s longstanding reluctance to
enforce agreements to arbitrate and its refusal to put such agreements on the same footing as
other contracts, and in the FAA expressed a strong federal policy in favor of resolving disputes
through arbitration.” Id. (citations omitted). “In particular, the FAA provides that as a matter of
federal law ‘[a] written provision’ in a maritime or commercial contract showing an agreement to
settle disputes by arbitration ‘shall be valid, irrevocable, and enforceable, save upon such
grounds as exist in law or in equity for the revocation of any contract.’” Id. (quoting 9 U.S.C. §
Section 3 of the FAA states that when a suit is brought upon a claim subject to
arbitration, a district court must stay the litigation to allow the arbitration to proceed. The statue
If any suit or proceeding be brought in any of the courts of the United States upon any
issue referable to arbitration under an agreement in writing for such arbitration, the court
in which such suit is pending, upon being satisfied that the issue involved in such suit or
proceeding is referable to arbitration under such an agreement, shall 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, providing the applicant for the stay is not in default in
proceeding with such arbitration.
9 U.S.C. § 3.
Resolving a motion to stay under Section 3 calls for a two-step inquiry. “[A] court asked
to stay proceedings pending arbitration must determine  whether there is a valid agreement to
arbitrate and, if so,  whether the specific dispute falls within the substantive scope of that
agreement . . . .” Medtronic AVE, Inc. v. Advanced Cardiovascular Sys., Inc., 247 F.3d 44, 54–55
(3d Cir. 2001). A court asked to enjoin an ongoing arbitration must undertake the same inquiry.
See PaineWebber, Inc. v. Hartmann, 921 F.2d 507, 511 (3d Cir. 1990) (“If a court determines
that a valid arbitration agreement does not exist or that the matter at issue clearly falls outside of
the substantive scope of the agreement, it is obliged to enjoin arbitration.”).
The FAA creates a presumption in favor of arbitration. This presumption, however, “does
not apply” to step one of our inquiry, namely, “to the determination of whether there is a valid
agreement to arbitrate between the parties.” Kirleis v. Dickie, McCamey & Chilcote, P.C., 560
F.3d 156, 160 (3d Cir. 2009) (quotations omitted). “The strong federal policy favoring
arbitration . . . does not lead automatically to the submission of a dispute to arbitration upon the
demand of a party to the dispute.” Century Indem. Co., 584 F.3d at 523.
Once a court reaches step two of the inquiry, the presumption in favor of arbitration
applies. Id. at 524. A district court is then directed to proceed to investigate the scope of the
arbitration provision, and to find out if the dispute at issue falls under the scope of the clause.
Medtronic AVE, Inc., 247 F.3d at 54–55. A court is presumed to decide whether or not a claim is
arbitrable—the threshold question of arbitrability—but the parties can require an arbitrator to
make this decision if they clearly and unmistakably delegate the question to the arbitrator. First
Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995).
FRAMEWORK OF THE DISPUTE
I have jurisdiction over this case because Lenox filed a complaint pursuant to a federal
statute, the Lanham Act. See 28 U.S.C. §§ 1331, 1338. A claim under the Lanham Act can only
be prosecuted by the owner of a trademark. Lenox’s complaint alleges that Blackshear’s conduct
has infringed on a trademark, the Ebony Visions Mark, which Lenox claims it owns. Blackshear
moves to stay this litigation because, he alleges, the ownership of the Ebony Visions Mark is
derived from the DSA, and therefore the dispute must be arbitrated. Lenox moves to enjoin the
arbitration because it argues that it owns the Ebony Visions Mark irrespective of the DSA. The
crux of this dispute is therefore the source of the ownership of “Thomas Blackshear’s Ebony
Visions” and the rights attendant to that ownership.
In resolving a motion to stay litigation pending arbitration and a motion to enjoin
arbitration, a court must first determine if the parties agreed to arbitrate any dispute. Once a valid
arbitration agreement is found, a court must determine if the parties intended an arbitrator or a
court to investigate the scope of the arbitration agreement at issue. This is the threshold question
of arbitrability. Then, if jurisdiction of the court is proper, a court must determine if this dispute
falls under the scope of the arbitration provision.
The parties do not question that a valid agreement to arbitrate exists. Blackshear,
however, argues that, pursuant to the DSA, the arbitrator must decide whether or not this dispute
is subject to arbitration. But courts are presumed to determine arbitrability unless the parties
clearly and unmistakably provide, in the agreement, that they intended arbitrability to be
determined by the arbitrator. I find as a matter of California law, the law designated in the DSA,
that the agreement does not speak to the threshold question of arbitrability. Therefore I have
jurisdiction to decide the scope of the arbitration provision in this matter.
Blackshear argues that “all” of Lenox’s claims are within the scope of the arbitration
provision of the DSA, because of, they allege, Lenox’s “erroneous belief that [Lenox] continues
to hold rights to manufacture and sell goods” under the Mark. Mot. to Stay 15, ECF No. 9.
Lenox asserts that “eight of the nine claims” raised by Blackshear in the AAMS arbitration are
premised on ownership of the Ebony Visions Mark and the rights commensurate with that
I find that a valid agreement to arbitrate exists, but that the parties did not agree to
arbitrate the threshold question of arbitrability. I therefore decide whether or not this dispute falls
under the scope of the arbitration agreement. Lenox does not meet its burden to overcome the
presumption in favor of arbitration. I will therefore grant Defendants’ Motion to Stay this matter
pending arbitration. ECF No. 9. I will deny Plaintiff’s Motion to Enjoin the arbitration ECF No.
A valid agreement to arbitrate exists.
It must first be determined if a valid agreement to arbitrate exists between the parties.
Kirleis, 560 F.3d at 160. This prong requires little inquiry. There is no dispute that the DSA was
valid when executed and binds both parties to this dispute. See Tr. of Mot H’rg 11:2-7; 14:2115:1, September 7, 2016.
This Court determines the threshold question of arbitrability.
The threshold question of arbitrability—whether a judge or arbitrator decides if a claim is
arbitrable—is “undeniably an issue for judicial determination.” AT & T Techs., Inc. v. Commc'ns
Workers of Am., 475 U.S. 643, 649 (1986). The parties may provide otherwise, but there is a
presumption that a judge decides whether or not a case is arbitrable. Id. “Courts should not
assume that parties agreed to arbitrate arbitrability” and should “hesitate . . . [to] force unwilling
parties to arbitrate a matter they reasonably would have thought a judge, not an arbitrator, would
decide.” First Options, 514 U.S. at 944-45.
The general rule is that courts apply state law in determining if parties agreed to arbitrate,
including the threshold question of arbitrability. Id. “We determine whether a party [has agreed
to arbitrate] by applying ordinary state-law principles . . . .” Century Indem. Co, 584 F.3d at 524
(quotations omitted); see First Options, 514 U.S at 944 (“When deciding whether the parties
agreed to arbitrate a certain matter (including arbitrability), courts generally . . . should apply
ordinary state-law principles that govern the formation of contracts.”); see also Chesapeake
Appalachia, LLC v. Scout Petroleum, LLC, 809 F.3d 746, 761 (3d Cir. 2016), cert. denied, 137
S. Ct. 40 (2016).8
First, state law is applicable to discern the substance of the parties’ agreement—did they
agree to arbitrate the threshold question of arbitrability? Courts must look to the “relevant state
law . . . to see whether the parties objectively revealed an intent to submit the arbitrability issue
to arbitration.” First Options, 514 U.S at 944; see also Arthur Andersen LLP v. Carlisle, 556
U.S. 624, 630–31 (2009). If the agreement at issue, as construed by state law, does not show that
the parties intended the arbitrator to answer the threshold question of arbitrability, there is
nothing to overcome the presumption of judicially determined arbitrability. In this case, the DSA
states that California law applies to the agreement. DSA §17.A.
Lenox argues that the DSA does not provide for the arbitrator to decide the threshold
question of arbitrability, and therefore the arbitrator cannot decide the issue. Blackshear argues
that the DSA is not truly silent on this issue because it incorporates by reference the 2015 rules
of the Arts Arbitration and Mediation Service (“2015 AAMS rules”). Blackshear claims the 2015
AAMS rules apply to the DSA, and that those rules call for arbitrability to be determined by the
arbitrator. Although the DSA does not directly address the threshold question of arbitrability, it
If ordinary state law principles indicate that the parties agreed to have an arbitrator decide the scope of the
arbitration clause, then, as a matter of federal law, courts should not defer to the arbitrator unless there is “clear and
unmistakable evidence” that the parties intended to arbitrate this initial question. First Options, 514 U.S at 944
All disputes arising out of this Agreement shall be submitted to mediation in accordance
with the rules of Arts Arbitration and Mediation Services, a program of California
Lawyers for the Arts. If mediation is not successful is [sic] resolving the entire dispute,
any outstanding issues shall be submitted to final and binding arbitration in accordance
with the rules of that program.
The 2015 AAMS rules provided by Blackshear state that: “[t]he 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.” R-7(a), AAMS Arbitration Rules and
Procedures, attached as Ex. B to Defs.’ Mot. to Stay, ECF No. 9. The central issue is whether the
2015 AAMS rules were incorporated into the DSA in 2004.
Under California law, an ancillary document is incorporated by reference into a
contract if “[t]he reference to the incorporated document [is] clear and unequivocal and
the terms of the incorporated document [are] known or easily available to the contracting
parties.” Slaught v. Bencomo Roofing Co., 30 Cal. Rptr. 2d 618, 621 (Cal. Ct. App.
1994). “[I]n order to make out a case for the application of the doctrine of incorporation
by reference, the paper referred to must  be in existence at the time of the execution,” of
the agreement. In re Plumel's Estate, 151 Cal. 77, 80 (1907). As the California Court of
Appeals has explained, it makes little sense “[t]o go beyond the incorporation of an
existent rule and allow for the incorporation of a rule that might not even come into
existence in the future . . . .” Gilbert St. Developers, LLC v. La Quinta Homes, LLC, 94
Cal. Rptr. 3d 918, 924 (Cal. Ct. App. 2009). The court held:
Incorporating the possibility of a future rule by reference simply doesn't even meet the
basic requirements for a valid incorporation by reference under simple state contract law.
Most basically, what is being incorporated must actually exist at the time of the
incorporation, so the parties can know exactly what they are incorporating.
Id.; see Yahoo! Inc. v. Iversen, 836 F. Supp. 2d 1007, 1012 (N.D. Cal. 2011) (“Incorporation of
the [American Arbitration Association (“AAA”)] rules by reference constitutes clear and
unmistakable evidence that the parties intended to submit the question of arbitrability to the
arbitrator, so long as what is being incorporated actually exists at the time of
incorporation . . . .” (quotations omitted)).
The DSA “clearl[y] and unequivocal[lly]” references the AAMS rules. Slaught, 30 Cal.
Rptr. at 621. But it is unclear whether the parties intended to incorporate the future rules of the
AAMS or the rules in effect at the time the 2004 agreement was executed. If the parties meant
the future rules, i.e. the 2015 AAMS rules, under California law they would not have been
validly incorporated because they were not in existence at the time the agreement was signed. In
re Plumel's Estate, 151 Cal. at 80.
If the parties intended to incorporate the AAMS rules in force in 2004, those rules have
not been provided by Blackshear. Because the presumption is that a court decides the scope of
the arbitration agreement, if Blackshear wished to have the arbitrator decide which claims were
subject to arbitration, he was required to produce the operative rules in force at the time the DSA
was executed. Also, publicly available information strongly suggests that the rule that gives the
arbitrator the power to determine the scope of the arbitration clause did not exist in the AAMS
rules in 2004. An internet archive shows that as of 2007, the AAMS website linked to an earlier
version of the AAMS rules that did not contain such a rule. See AAMS Arbitration Rules link,
California Lawyers for the Arts (Feb. 5, 2007), https://web.archive.org/web/20070613041645
/http://www.calawyersforthearts.org/conflictresolution.html (last visited December 21, 2016).
The parties did not and could not incorporate the 2015 AAMS rules into the DSA in
2004. They incorporated an earlier version of the AAMS rules, and those rules have not been
produced and appear to be silent as to the threshold question of arbitrability. The DSA itself,
pursuant to California law, is therefore also silent as to the threshold question of arbitrability.
Gilbert St. Developers, LLC, 94 Cal. Rptr. at 924. When the agreement does not address who
decides arbitrability, there is no evidence to rebut the presumption that a judge determines if the
dispute is arbitrable. Therefore, I determine the scope of the arbitration clause. 9
This dispute falls under the scope of the arbitration clause.
Once a court finds that a valid agreement to arbitrate exists and that it is the court’s
responsibility to decide the threshold issue of arbitrability, it must then be decided if the dispute
arising from the complaint falls under the scope of the arbitration provision. If the dispute as
alleged in the complaint falls under the arbitration clause, the court must send the dispute to the
arbitrator for adjudication. If the dispute before the court does not fall under the arbitration
clause, the court, of course, must decide the merits itself.
A presumption in favor of arbitrability arises when the court investigates the scope of an
arbitration clause.10 Century Indem. Co, 584 F.3d at 524. This presumption is only overcome
I do not need to invoke the “clear and unmistakable” test when state law dictates that the parties did not
agree to arbitrate arbitrability. The federal “clear and unmistakable” test is only triggered if state law first
demonstrates that the parties intended, in their contract, to arbitrate arbitrability. First Options, 514 U.S at 944. If
the agreement at issue, as construed by state law, does not show that the parties intended the arbitrator to answer the
threshold question of arbitrability, there is no need to employ the federal “clear and unmistakable” test, and the
presumption in favor of judicially determined arbitrability is not rebutted.
Although “[v]irtually every circuit to have considered the issue has determined that incorporation of the
[American Arbitration Association (“AAA”)] arbitration rules constitutes clear and unmistakable evidence that the
parties agreed to arbitrate arbitrability,” Chesapeake Appalachia, LLC, 809 F.3d at 763 (listing cases), those cases
do not address the situation where relevant state law dictates that the document referenced was not validly
Defendants argue that California law governs the determination of the scope of the arbitration provision
and the significance of the “arising under” language. See Defs.’ Reply Mot. Stay at 9, ECF No. 18. While ordinary
state law principles apply to the first prong—whether or not the parties agreed to arbitrate any disputes—federal law
governs the second prong—whether nor not a particular dispute falls within the scope of the arbitration clause.
Century Indem. Co., 584 F.3d at 524. A dispute about the scope of an arbitration clause under the FAA, “is properly
characterized as arising under the body of federal law regulating interstate commerce,” and “[f]ederal law therefore
applies to [the] determination of the scope of th[e] arbitration agreement.” Mediterranean Enterprises, Inc. v.
Ssangyong Corp., 708 F.2d 1458, 1463 (9th Cir. 1983); see Century Indem. Co., 584 F.3d at 524 (“Inasmuch as
federal law applies to the interpretation of arbitration agreements, once a court has found that there is a valid
agreement to arbitrate . . . the determination of whether a particular dispute is within the class of those disputes
governed by the arbitration clause ... is a matter of federal law.”) (quotations omitted).
with “positive assurance that the arbitration clause is not susceptible of an interpretation that
covers the asserted dispute.” AT & T Techs., Inc., 475 U.S. at 650 (quotations omitted). To
establish “positive assurance,” the party seeking to avoid arbitration “must either: (1) establish
the existence of ‘an[ ] express provision excluding [the] grievance from arbitration’; or (2)
provide “the most forceful evidence of a purpose to exclude the claim from arbitration.” Lukens
Steel Co. v. United Steelworkers of Am. (AFL-CIO), 989 F.2d 668, 673 (3d Cir. 1993) (quoting
AT & T Techs., Inc., 475 U.S. at 650). “[A]ny doubts concerning the scope of arbitrable issues
should be resolved in favor of arbitration . . . .” Moses H. Cone Mem'l Hosp. v. Mercury Constr.
Corp., 460 U.S. 1, 24 (1983). “[I]n deciding whether the parties have agreed to submit a
particular grievance to arbitration, a court is not to rule on the potential merits of the underlying
claims.” Lukens Steel Co., 989 F.2d at 672 (quotations omitted).
Lenox bears the burden of showing “positive assurances” via “forceful evidence
suggesting that the parties intended to exclude the dispute at issue from arbitration.” Rite Aid of
Pennsylvania, Inc. v. United Food & Commercial Workers Union, Local 1776, 595 F.3d 128,
132 (3d Cir. 2010) (quotations omitted). This Circuit has held that “positive assurance” does not
mean “absolute certainty,” PaineWebber Inc., 921 F.2d at 513, and that “a compelling case for
nonarbitrability should not be trumped by a flicker of interpretive doubt.” Gay v. CreditInform,
511 F.3d 369, 387 (3d Cir. 2007) (quotations omitted). Furthermore, the breadth of an arbitration
provision is determined with special attention to the facts of the particular claims at issue. “To
determine whether a claim falls within the scope of an arbitration agreement, the focus is on the
The presumption in favor of arbitrability does not apply to all arbitration provisions, even at step two of this
inquiry, but I find that the presumption does apply to the “broad” arbitration provision at issue here. See Local 827,
Int'l Bhd. of Elec. Workers, AFL-CIO v. Verizon New Jersey, Inc., 458 F.3d 305, 311 (3d Cir. 2006) (“If the
arbitration clause is clearly broad or ambiguous, we will apply the presumption of arbitrability. If the clause is not
ambiguous and clearly delimits the issues subject to arbitration, the presumption of arbitrability does not apply.”).
factual underpinnings of the claim rather than the legal theory alleged in the complaint.”
Medtronic AVE, Inc. 247 F.3d at 55 (quotations omitted).
The scope of arbitration provision at issue is limited to disputes “arising out of” the
agreement. DSA § 17.B. Section 17.C of the agreement adds: “[b]oth parties shall have the right
to seek assistance with disputes arising solely out of this Agreement using binding arbitration
and/or mediation.” DSA § 17.C. Blackshear contends that all of Lenox’s claims are within the
scope of the arbitration provision of the agreement, because of, Blackshear claims, Lenox’s
“erroneous belief that [Lenox] continues to hold rights to manufacture and sell goods” under the
Ebony Visions Mark. Mot. to Stay 15, ECF No. 9. The central question is, therefore, from where
did Lenox’s “rights to manufacture and sell goods” under the Ebony Visions Trademark arise?
Blackshear seeks to arbitrate trademark claims premised upon an agreement that, at least
in part, contemplates the right to sell or advertise products and the right to use a trademark. The
DSA states that “for the Term of this Agreement . . . COMPANY shall have the right to use,
manufacture, have manufactured, sell, distribute and advertise Products in the Territory.” DSA
§1.A. The agreement also plainly references intellectual property, including the Ebony Visions
Mark. 11 See DSA §9; Schedule A ¶ 2, DSA. Blackshear presents a colorable argument that
Lenox’s ability to use the trademarks referenced in the agreement were limited to the term of the
agreement itself. See DSA §9.A (“during the Term of this Agreement . . .”). There is no dispute
that the DSA expired in 2013. Mot. to Stay 15.
The full clause reads:
A. Company shall seek, obtain, and, during the Term of this Agreement, maintain in its own name and at
its own expense, appropriate intellectual property protection for the Property and Trademark.
B. Designer agrees to execute any documents reasonably requested by Company to effect any of the
C. Designer shall acknowledge Company’s exclusive rights in the Property and the Trademarks and
acknowledges that the Property and/or the Trademark are owned by Company. Designer shall not
dispute or contest, directly or indirectly Company’s exclusive right and title to the Property and/or the
Trademarks or the validity thereof.
There is also one reference in the agreement to a license. DSA §12 (“COMPANY shall
have the right, in its discretion, to institute and prosecute lawsuits against third persons for the
infringement of the rights licensed in this Agreement.”). If one of the rights “licensed” in the
agreement was the right to use the Ebony Visions Mark, then a trademark claim premised on the
rightful ownership of that trademark arises under the agreement. Such a claim is subject to the
Resolving all doubts in favor of arbitration, Moses H. Cone Mem'l Hosp., 460 U.S. at 24,
it cannot be said with “positive assurances” that the DSA is not “susceptible to an interpretation”
that governs this dispute. AT & T Techs., Inc., 475 U.S. at 650 (quotations omitted). Lenox has
not presented “forceful evidence” to overcome the presumption in favor of arbitration. Lukens
Steel Co, 989 F.2d at 673.12
Lenox contends that “even assuming [the DSA] did convey the Ebony Visions Mark to Thomas Blackshear
upon expiration of that agreement, that trademark interest was long ago extinguished through the D56, Inc.
bankruptcy.” Mot. to Enjoin 4. But I do not look to the merits of the dispute, Lukens Steel Co., 989 F.2d at 672, and
therefore have not decided that the DSA functioned as a license or assignment. I have only decided that a dispute as
to the ownership of the Ebony Visions Mark arises under the DSA. Whether or not a true assignment occurred will
be for the arbitrator to determine.
For the reasons set forth above, Defendants’ Motion to Stay is granted13 and Plaintiff’s
Motion to Enjoin is denied.
s/Anita B. Brody
ANITA B. BRODY, J.
Copies VIA ECF on _________ to:
Copies MAILED on _______ to:
The Motion to Stay is granted with respect to all Defendants. Lenox argues that because Roger W. Rawls,
Keepsakes and Collectables, LLC and Blackshear Enterprises, Inc., were not signatories to the 2004 DSA, they
cannot be subject to the arbitration provision. Lenox asks me to only grant the stay with respect to Blackshear, the
sole signatory. Defendants counter that Lenox is equitably estopped from avoiding arbitration with Rawls and the
two corporate entities.
I find I am precluded from doing anything but granting the stay entirely. As the Supreme Court has
recognized, nonparties to a contract are not categorically barred from relief under §3 of the FAA—“a litigant who
was not a party to the relevant arbitration agreement may invoke § 3 if the relevant state contract law allows him to
enforce the agreement.” Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 632 (2009). Under California law,
“allegations of interdependent and concerted misconduct by signatories and nonsignatories will justify allowing a
nonsignatory to enforce an arbitration clause only . . . when the claims against the nonsignatory are inextricably
bound up with the terms and duties of the contract the plaintiff has signed with the other defendant.” Goldman v.
KPMG LLP, 92 Cal. Rptr. 3d. 534, 547 (Cal. Ct. App. 2009) (quotation omitted).
Equitable estoppel is an awkward vehicle for Defendants to rely on here. The point of the doctrine is to
prevent signatories from “hav[ing] it both ways; the signatory cannot on the one hand, seek to hold the nonsignatory liable pursuant to duties imposed by the agreement, which contains an arbitration provision, but, on the
other hand, deny arbitration's applicability because the defendant is a non-signatory.” Id. at 220 (quotations
omitted). Here, Lenox does not seek to hold Rawls and the two LLCs liable “pursuant to duties imposed by the
agreement” because it argues the relevant duties have nothing to do with the agreement. Forcing Lenox to arbitrate
with the non-signatory Defendants therefore seems contrary to the “linchpin for equitable estoppel—fairness.” Id.
Nonetheless, were I to deny the stay with respect to the non-signatory defendants, I would be deciding that Lenox’s
right to enforce the trademark and to sell the Ebony Visions line is sourced from something other than the 2004
DSA. I have found that this is for the arbitrator to determine. Therefore, the Stay is granted with respect to all
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