Archer and White Sales, Inc. v. Henry Schein, Inc. et al
MEMORANDUM OPINION AND ORDER re 66 Joint MOTION to Stay Proceedings Pending Appeal filed by Dental Equipment LLC, Henry Schein, Inc., KaVo Dental Technologies, LLC, Instrumentarium Dental Inc., Dental Imaging Technologies, Corporation, Danaher Corporation.. Signed by Judge Rodney Gilstrap on 2/17/2017. (nkl, )
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TEXAS
ARCHER AND WHITE SALES, INC.
HENRY SCHEIN, INC. ET AL.,
Civil Action No. 2:12-cv-572-JRG
MEMORANDUM OPINION AND ORDER
Before the Court is the Motion to Stay Proceedings Pending Appeal (Dkt. No. 66) filed by
Defendant Henry Schein, Inc. and Defendants Danaher Corporation, Instrumentarium Dental Inc.,
Dental Equipment LLC, Kavo Dental Technologies, LLC, and Dental Imaging Technologies
Corporation (collectively, “Defendants”). Having considered the briefing and the relevant
authorities, the Court is of the opinion that the Motion should be and hereby is DENIED.
On December 7, 2016, the Court entered an Order denying Defendants’ respective Motions
to Compel Arbitration (Dkt. No. 63). A week later, Defendants filed Notices of Appeal (Dkt. Nos.
64, 65). Defendants also filed this Motion to Stay Proceedings Pending Appeal (Dkt. No. 66)
which is now before the Court.
II. LEGAL STANDARDS
Under Fifth Circuit law, the stay of a case pending appeal constitutes “extraordinary
relief.” Reading & Bates Petroleum Co. v. Musslewhite, 14 F.3d 271, 275 (5th Cir. 1994). In the
context of arbitration, the Fifth Circuit has held that a party is not entitled to an automatic stay of
district court proceedings pending appeal from a denial of a motion to compel arbitration.
Weingarten Realty Inv’rs v. Miller, 661 F.3d 904, 907–10 (5th Cir. 2011). Instead, the decision
whether to stay a case lies within the sound discretion of the district court. Weingarten Realty
Investors, 611 F.3d at 910. In exercising such discretion, a court analyzes four factors: (1) whether
the movant has made a strong showing that it is likely to succeed on the merits; (2) whether the
movant will be irreparably injured absent a stay; (3) whether issuance of the stay will substantially
injure other parties interested in the proceedings; and (4) whether the public interest favors a stay.
Weingarten Realty Investors, 661 F.3d at 910. These traditional four factors “must be fully applied
except where there is a serious legal question involved and the balance of equities heavily favors a
stay; in those situations, the movant only needs to present a substantial case on the merits.”
Weingarten Realty Investors, 661 F.3d at 910 (emphasis added).
a. Factor One: Likelihood of Success on the Merits
As to the first factor, Defendants argue that they need only present a “substantial case” on
the merits, rather than a “strong showing,” because the Court’s Order allegedly raises serious legal
issues (namely, the questions of “whether arbitration clauses that include exceptions for certain
kinds of relief or certain kinds of claims are subject to the rule of Petrofac and whether the
arguments that Defendants raised are ‘wholly groundless’”). (Dkt. No. 66, at 4–5.)
The “substantial case” standard relied upon by Defendants stems from the Fifth Circuit’s
decision in Ruiz v. Estelle, 650 F.2d 555, 565 (5th Cir. 1981), which the Circuit later applied to the
arbitration context in Weingarten Realty Investors. Under that standard, a movant need only
present a substantial case on the merits “where there is a serious legal question involved and the
balance of equities heavily favors a stay.” Weingarten Realty Investors, 661 F.3d at 910 (emphasis
In Weingarten Realty Investors, the Fifth Circuit held that a serious legal question did not
exist where the dispute involved a “private contractual matter regarding whether arbitration is
required.” 661 F.3d at 910. In so determining, the Circuit contrasted the private issue of the
arbitrability of a dispute between two parties to the serious question of statutory interpretation that
was at issue in United States v. Baylor University Medical Center, 711 F.2d 38, 40 (5th Cir. 1983),
which “could have had a broad impact on relations between the states and the federal
government.” Weingarten Realty Investors, 661 F.3d at 910 n.9. See also Wildmon v. Berwick
Universal Pictures, 983 F.2d 21, 24 (5th Cir. 1992) (“No such serious legal question is involved
here. This case involves only a private contractual matter . . . .”).
Notably, Defendants failed to discuss (or even cite) the Fifth Circuit’s decision in
Weingarten Realty Investors in their Motion, even though the opinion addresses the precise issue
in this case—a stay of proceedings pending denial of a motion to compel arbitration. Rather than
attempting to distinguish this case from Weingarten Realty Investors, Defendants merely
characterize the Court’s decision in this case as one that would decide the broad question of
“whether arbitration clauses that include exceptions for certain kinds of relief or certain kinds of
claims are subject to the rule of Petrofac.” Defendants overstate this Court’s holding. The Court
did not purport to create a new rule of law—or even modify an existing rule. The Court’s decision
merely applied the governing law in Petrofac to the text of the unique arbitration clause in this
Likewise, Defendants’ argument that a serious legal question exists based on whether their
arguments in favor of arbitration were “wholly groundless” is also without merit. Again, the
Court’s Order simply applied existing Fifth Circuit law to the facts of this case without raising any
novel legal issues. The effect of the Court’s conclusion extends no further than any other ruling in
any other case. 1 See Wildmon v. Berwick Universal Pictures, 983 F.2d 21, 24 (5th Cir. 1992)
(“Whether the particular contract at issue does or does not permit exhibition or distribution of the
film . . . is of no concern to others. Except for the Plaintiffs, the results of this dispute have no
far-reaching effects or public concerns to anyone—unlike those at issue in Baylor.”).
Even if Defendants could demonstrate that a “serious legal issue” exists in this case, as
discussed below, Defendants have not met their burden to show that the balance of equities weighs
heavily in their favor. The equities of this matter are developed in detail below, but the apparent
conclusion of such analysis is that they do not heavily favor a stay. Accordingly, without the
balance of equities tilted heavily in their favor, Defendants cannot rely on the “substantial case on
the merits” standard to demonstrate the first factor of the traditional four-factor analysis. Thus,
Defendants must present a “strong showing” that they are likely to succeed on the merits.
Weingarten Realty Investors, 661 F.3d at 910. This they have not done.
Any argument that Defendants have demonstrated a strong showing of a likelihood of
success is belied by the exchange that occurred during oral argument on the motions to compel
arbitration. (Transcript, Dkt. No. 81, 23:11–20.) Looking at the text of the arbitration clause
(which expressly excludes from arbitration actions seeking injunctive relief and disputes related to
Any judicial decision is subject to being cited in the future, and in that context every decision potentially reaches
further than the case itself. However, here the Court merely applied the established precedent of this Circuit to the
unique facts of this case. Every case has its own unique facts. No broad statements or dicta were included to “push the
needle” any further than necessarily occurs in every case. In this Court’s view, Defendants argue for “serious legal
questions,” at least in part, because their posture under the traditional four-factor test is weak.
trademarks, trade secrets or other intellectual property), the Court asked Defendants if there could
be a “plausible argument” for arbitration under Douglas v. Regions Bank, 757 F.3d 460 (5th Cir.
2014), if a plaintiff were to bring a trademark infringement case against Defendant Pelton &
Crane. (Transcript, Dkt. No. 81, 23:11–16.) In response, Defendants’ counsel stated: “If all the
complaint is doing is seeking relief for an alleged trademark-based injury, then I would say likely
it would not be a plausible reading.” (Transcript, Dkt. No. 81, 23:18–20.) This situation, where the
relief requested included injunctive relief, is no more plausible and is far from a “strong showing.”
The plain language of the arbitration clause in this case carves out actions seeking injunctive relief
in the same way that it carves out disputes regarding trademark infringement. As discussed in the
Court’s Order denying the motions to compel arbitration, Defendants’ arguments in favor of
arbitrability are not persuasive.
Given that Defendants have presented no new arguments, but instead have merely re-urged
arguments already considered by the Court, Defendants have not demonstrated a likelihood of
success on the merits. As such, this factor weighs against a stay.
b. Factor Two: Irreparable Injury
Defendants argue that they will suffer irreparable injury because they will be forced to
participate in discovery and will be deprived of their right to select the forum in which their
disputes are resolved.
Although Defendants rely on a Seventh Circuit case to argue that arbitration may be faster
and cheaper than district court litigation (and thus, that a stay is warranted), the Fifth Circuit has
held that purported speed and cost savings brought about by arbitration are insufficient to show
irreparable injury. Weingarten Realty Investors, 661 F.3d at 913 (“[W]e reject the idea that
arbitration ensures substantial speed and cost savings, so these considerations alone do not
constitute irreparable injury.”). 2 See also Peru v. Unisert Multiwall Sys., Inc., No. 4:14-cv-773,
2014 WL 7338863, at *3 (S.D. Tex. Dec. 22, 2014) (finding no irreparable injury where defendant
argued that it would incur additional costs and attorney fees if the suit was not stayed pending
appellate review of arbitrability). As such Defendants’ arguments regarding speed and costs
savings are insufficient to justify a stay in this case.
As to discovery, the Fifth Circuit in Weingarten Realty Investors left open the possibility
that discovery that could jeopardize the movant’s right to arbitrate, when added to the potential
cost increases brought about by litigating in court, could be an irreparable injury—“particularly
where parties contracted for arbitration to limit discovery of sensitive information.” 661 F.3d at
913 n.19. Defendants, however, failed to explain how discovery in this case could harm their
alleged right to arbitrate. As Plaintiff notes, any discovery that occurs in litigation could be used in
arbitration, if arbitration were found to be appropriate. (Dkt. No. 70, at 5.) Moreover, Defendants
have not argued that the arbitration clause in this case was designed to limit discovery of sensitive
information. See Weingarten Realty Investors, 661 F.3d at 913 n.19. As such, Defendants have
failed to meet their burden to show irreparable harm. This factor weighs against a stay.
c. Factor Three: Substantial Injury to Other Parties Interested in
Defendants argue that the only harm Plaintiff will suffer by a stay is an additional delay in
adjudication of this dispute. (Dkt. No. 66, at 6.) Even if that were the only harm to Plaintiff, it is a
degree of harm for the Court to consider. Although the substantial delays in this case (for which
As noted previously, Defendants’ Motion failed to address the Fifth Circuit’s decision in Weingarten Realty
Investors, and Defendants did not file a Reply Brief in response to Plaintiff’s reliance on this precedent. The
Defendants’ silence on this is telling.
both parties are at fault) have already resulted in some harm, that does not excuse or negate the
additional harm that further delay would bring about.
Regardless of whether delay alone is sufficient harm, Plaintiff has identified additional
tangible harms, unique to the circumstances of this case, that would be caused by a stay. (Dkt. No.
70, at 6.) Specifically, Plaintiff notes that it has been served with two subpoenas in In re Dental
Supplies Antitrust Litigation, No. 1:16-cv-00696-BMC-GRB (E.D.N.Y.), which is a consolidated
set of class actions brought by direct purchasers of dental supplies against Defendant Schein and
others. (Dkt. No. 70, at 6.) Such subpoenas ask Plaintiff to turn over documents that support
Plaintiff’s claims in this lawsuit. (Dkt. No. 70, at 6.)
Plaintiff elaborated on these ongoing parallel proceedings during the November 9, 2016,
hearing on Defendants’ Motions to Compel Arbitration. (Transcript, Dkt. No 81, 4:16–5:11.) At
the hearing, Plaintiff explained that a series of class actions had been filed in the Eastern District of
New York against Defendant Henry Schein (and others). (Dkt. No. 81, 4:20–23.) Those cases were
consolidated for discovery. (Dkt. No. 81, 4:20–21.) The discovery schedule in the consolidated
case was structured to coordinate with the discovery schedule in another related antitrust case
brought by SourceOne Dental against Defendant Henry Schein (among others). (Dkt. No. 81, 5:4–
Staying this case would deprive Plaintiff of the opportunity to coordinate efficient
discovery efforts with the litigants in such related proceedings, specifically because discovery in
the Dental Supplies Antitrust Litigation case closes in mid-2017. (See Dkt. No. 70, at 6.) As noted
in Plaintiff’s Response, the witnesses in this case will likely overlap with those in the related New
York cases. (Dkt. No. 70, at 6 nn.4, 5.) Defendants have not disputed or responded to these
concerns, and the Court finds no reason to minimize the import of such practical consequences.
(See Dkt. No. 72 (notifying the Court that Defendants would not be filing a Reply brief).)
In short, staying this case would prevent Plaintiff from coordinating with the litigants in
the ongoing related proceedings, thus limiting the synergies and efficiencies that could otherwise
accrue to substantial benefit. A stay would necessarily increase discovery costs for Plaintiff—and
potentially for Defendant Schein. Based on the unique time-sensitive harm that would be brought
about by staying this case, this factor weighs strongly against granting a stay.
d. Factor Four: Public Interest
Defendants argue that the general federal policy in favor of arbitration warrants granting a
stay in this case. (Dkt. No. 66, at 6–7.) Defendants in other cases have made this same argument
without success. See, e.g., Grant v. Houser, 799 F. Supp. 2d 673, 679–80 (E.D. La. 2011); Peru v.
Unisert Multiwall Sys., Inc., No. 4:14-cv-773, 2014 WL 7338863, at *4 (S.D. Tex. Dec. 22, 2014).
As one district court noted in response to this argument, “[i]f this policy were sufficient to warrant
a stay, a stay pending interlocutory appeal of a denial of a motion to compel arbitration would be
reflexive.” Peru, 2014 WL 7338863, at *4. Fifth Circuit precedent definitively holds that such a
stay is not automatic, thus indicating that the general policy favoring arbitration is not dispositive
or absolute. See Weingarten Realty Investors, 661 F.3d at 907.
Even giving weight to the policy favoring arbitration, the Court is not persuaded that this
general policy is sufficient to tilt this factor in favor of the Defendants, particularly in this
case—and especially in light of the Court’s previous holding that Defendants’ arguments in favor
of arbitration were wholly groundless. (Dkt. No. 63.) Defendants could have presented additional
arguments, aside from the general policy favoring arbitration, to demonstrate why the public
interest favors a stay in this case. They did not. As such, the “public interest in speedy resolution of
disputes prevails,” and this factor weighs against a stay. See Weingarten Realty Investors, 661 F.3d
Having carefully considered the relevant factors as applied to the circumstances of this
case, the Court, in its discretion, determines that Defendants’ Motion to Stay Proceedings Pending
Appeal (Dkt. No. 66) should be and hereby is DENIED.
SIGNED this 19th day of December, 2011.
So ORDERED and SIGNED this 17th day of February, 2017.
UNITED STATES DISTRICT JUDGE
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