The Shipman Agency, Inc. v. TheBlaze, Inc. et al

Filing 27

MEMORANDUM OPINION AND ORDER granting 18 Sealed Amended Motion to Stay and Compel Arbitration. The provision in Paragraph 12 of the 2017 License Agreement that limits Plaintiff's remedies to money damages is severed from the Agreement. This action is dismissed without prejudice. (Signed by Judge Sim Lake) Parties notified. (aboyd, 4)

United States District Court
Southern District of Texas

ENTERED
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION

THE SHIPMAN AGENCY, INC.,

§
§
§
§
§
§
§
§
§

Plaintiff,
v.

THEBLAZE INC. and TYLER CARDON,
Defendants.

June 22, 2018
David J. Bradley, Clerk

CIVIL ACTION NO. H-18-0772

MEMORANDUM OPINION AND ORDER

Plaintiff The Shipman Agency, Inc.
"Licensor")
TheBlaze,

brings
Inc.

six

causes

action

against

defendants

and

( "TheBlaze")

of

Tyler

Cardon

("Cardon")

(collectively, "Defendants") for:
15 U.S.C.

§

1114(a) (1),

("Plaintiff," "Shipman" or

(1) violation of the Lanham Act,

(2) violation of the Lanham Act, 15 U.S.C.

§

1125 (a) ,

( 3) violation of the Texas Business and Commerce Code

§

16.102,

(4)

( 6)

tortious

unfair competition,

(5)

promissory estoppel,

and

interference with prospective business relations. 1

Pending before the court is Defendants TheBlaze Inc.

and Tyler

Cardon's Amended Motion to Stay and Compel Arbitration and Brief in
Support

("Defendants'

Motion to Compel")

For the reasons stated below,

(Docket Entry No.

18) .

the court will grant Defendants'

Motion to Compel.

1

See
Plaintiff's
First
Amended
Complaint"), Docket Entry No. 14.

Complaint

("Amended

Background2

I .

Plaintiff is an advertising agency and a television creation
and production company owned and operated by Stephanie Shipman.
TheBlaze is a digital network that licenses television and radio
content from producers to provide to its subscribers.
the president of TheBlaze and its parent company,
Inc. 3

Arts,

entered

into

Cardon is

Mercury Radio

For the last five years Plaintiff and TheBlaze have
successive

license

agreements

in which

licensed its content to TheBlaze to air on television.

Plaintiff
On May 22,

2017, the parties executed their most recent licensing agreement
("2017 License Agreement" or "the Agreement") for TheBlaze to air
Plaintiff's programs.

The

2017

License Agreement

governs

the

relationship between Plaintiff and TheBlaze, provides details about
airing

Plaintiff's

programs

and

advertising,

and

contains

a

mandatory arbitration provision. 4
Plaintiff alleges that in 2018 Cardon aimed to destroy the
relationship between Shipman and TheBlaze, rejected advertisements
from

Plaintiff's

sponsors,

and refused to provide

minutes of commercial airtime.
its promises

2

TheBlaze never

See id. at 2-12

~~

Shipman two

Plaintiff alleges that contrary to
ran banner

ads

on

its website or

4-72.

Declaration of Ivan Ivankovich ("Ivankovich Declaration"),
Exhibit A to Defendants' Motion to Compel, Docket Entry No. 18-1,
3

p. 2 ~ 4.
4

See 2017 License Agreement, Exhibit A-1 to Defendants' Motion
to Compel, Docket Entry No. 18-2.
-2-

promoted Plaintiff's shows on television, radio, or social media.
Plaintiff and TheBlaze began negotiating a license agreement for
2018, but on February 21, 2018, TheBlaze informed Plaintiff that it
would not enter into a 2018 license agreement.

On March 5, 2018,

Plaintiff sent TheBlaze a notice of termination of the 2017 License
Agreement.
license

Plaintiff alleges that "[d]espite the fact that its

has

been

terminated,

the

Blaze

is

continuing

to

air

Shipman's shows and willfully infringe The Registered Trademarks on
television and on digital media." 5

Plaintiff also alleges that

Cardon has defamed Plaintiff to its sponsors, causing the companies
to cancel their sponsorships of Plaintiff's programs.
Plaintiff filed this action on March 12, 2018, and filed its
First

Amended

Complaint

on

April

13,

2018,

seeking

damages,

permanent injunctive relief, and other appropriate costs and relief
as the court deems appropriate. 6

Defendants have moved to stay

this action and to require Plaintiff to arbitrate its claims with
Defendants pursuant to the Federal Arbitration Act and the Texas
General Arbitration Act. 7
II.
Defendants
contained

a

argue

valid

that

Analysis

because

arbitration

the

2017

provision

License Agreement
and

that

~

because

5

Amended Complaint, Docket Entry No. 14, p. 10

6

See id. at 17-18

7

See Defendants' Motion to Compel, Docket Entry No. 18, p. 16.

~

57.

114.

-3-

Plaintiff's claims fall within the scope of that provision,
court should stay the action and compel arbitration. 8

the

Plaintiff

responds that no arbitration agreement exists as to the unexecuted
2018 License Agreement, that the arbitration provision in the 2017
License

Agreement

Plaintiff's

is

claims

illusory

fall

and

outside

unconscionable,

the

scope

of

and

the

that

arbitration

provision. 9
A.

Applicable Law

Under
agreement

the
in

Federal
a

Arbitration Act

contract

evidencing

a

("FAA")

an arbitration

transaction

involving

interstate commerce is "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.

§

Underlying the FAA is

2.

"the

fundamental principle that arbitration is a matter of contract."
AT&T Mobility LLC v.

Concepcion,

131 S.

Ct.

1740,

1745

(2011)

(internal quotation marks omitted); see Washington Mutual Finance
Group,

LLC v.

Bailey,

364 F.3d 260,

264

(5th Cir.

2004)

("The

purpose of the FAA is to give arbitration agreements the same force
and effect as other contracts -- no more and no less.").
In determining whether to enforce an arbitration agreement
"[f] irst,

8

the court asks whether there is a valid agreement to

Id.

9

Plaintiff's Response in Opposition to Defendants' Motion to
Stay and Compel Arbitration ("Plaintiff's Response"), Docket Entry
No. 25, pp. 11-19.
-4-

arbitrate and, second, whether the current dispute falls within the
scope of a valid agreement."
Action No. 17-20082,
2018)

Edwards v.

Doordash,

2018 WL 1954090, at *3

Inc.,

Civil

(5th Cir. April 25,

(citing Klein v. Nabors Drilling USA L.P., 710 F.3d 234, 236

(5th Cir.

2013)).

agreement

to

federal

If the parties have entered into a binding

arbitrate,

statute

or

the

policy

court
renders

must
the

determine
claims

JP Morgan Chase & Co. v. Conegie ex rel. Lee,
(5th Cir. 2007)

whether

any

nonarbitrable.

492 F.3d 596,

598

The party seeking to invalidate an arbitration

agreement bears the burden of establishing its invalidity.

Carter

v. Countrywide Credit Industries, Inc., 362 F.3d 294, 297 (5th Cir.
2004).

A court should resolve all doubts concerning the arbitra-

bility of claims in favor of arbitration.

Mitsubishi Motors Corp.

v. Soler Chrysler-Plymouth, Inc., 105 S. Ct. 3346, 3353-54 (1985).
B.

There is a Valid Agreement to Arbitrate

The court must first decide whether an agreement to arbitrate
was formed.
12.

Paragraph 12 of the Agreement states:

Governing Law/Dispute Resolution:
This Agreement
shall be construed in accordance with, and shall in
all respects be governed by, the laws of the State
of Texas.
Any and all disputes, claims and
controversies arising out of or relating to any
provision of this Agreement, or breach or alleged
breach thereof, shall be settled by confidential
arbitration in Dallas, Texas, before a single
arbitrator, with experience in the entertainment
industry,
in accordance
with
the
commercial
arbitration rules of the American Arbitration
Association,
and any award rendered in such
proceeding shall be final and binding upon the
parties hereto. Judgment on the award may be
entered in any court having jurisdiction thereof.
-5-

In the event of any dispute relating to the subject
matter hereof, Licensor's sole remedy shall be to
pursue an action at law for money damages, and
Licensor agrees the Licensor shall not seek to or
be entitled to enjoin the distribution, advertising
or exploitation of the Programs or the exercise of
any of the rights granted herein or terminate or
rescind this Agreement.
No failure on the
part of Licensor or TBI to exercise, and no delay
in exercising, any right hereunder shall operate as
a waiver thereof; nor shall any single or partial
exercise of any right hereunder preclude any other
or further exercise thereof or the exercise of any
other right. The remedies herein provided are
cumulative and not exclusive or in limitation of
any other right or remedy provided at law or in
equity as otherwise provided herein. 10 (hereinafter
the "Arbitration Provision")
1.

The Arbitration Provision is Not Illusory

Plaintiff argues that the Arbitration Provision is illusory
because
contract

it

"restricts

but

the

unilaterally

power

of

retains

Shipman
that

to

power

terminate
for

the

Blaze." 11

Plaintiff also argues that the Arbitration Provision is illusory
because it does not include a savings clause similar to the one at
issue

in

In

re

Halliburton

Co.,

80

S.W.3d

566

(Tex.

2002). 12

Defendant responds that the Arbitration Provision is not illusory
because Paragraph 15 of the 2017 License Agreement states that the
arbitration provision survives the termination of the contract. 13
10

2017 License Agreement, Exhibit A-1 to Defendant's Motion to
Compel, Docket Entry No. 18-2, pp. 6-7 ~ 12.
11

Plaintiff's Response, Docket Entry No. 25, p. 14.

12

Id. at 15.

13

Defendants' Reply to Plaintiff's Response in Opposition to
Defendants'
Amended Motion to Stay and Compel Arbitration
("Defendants' Reply"), Docket Entry No. 26, pp. 6-7.
-6-

Since arbitration agreements are matters of
validity

and

contract law.
2008).

scope

of

such

agreements

are

contract,

governed

by

the

state

Morrison v. Amway Corp., 517 F.3d 248, 254 (5th Cir.

An arbitration agreement is illusory under Texas law "where

one party has the unrestrained unilateral authority to terminate
its obligation to arbitrate."

Nelson v. Watch House International,

L.L.C., 815 F.3d 190, 193 (5th Cir. 2016)
omitted) .

(quotations and citations

In Halliburton the Texas Supreme Court held that because

of two "savings clauses," the employer could not "avoid its promise
to

arbitrate

altogether." 14

by

amending

the

provision

or

terminating

it

Halliburton, 80 S.W.3d at 570.

Because Paragraph 15 of the 2017 License Agreement states that
the

Arbitration

Provision

"will

survive

any

expiration

or

termination of this Agreement," 15 no party has unilateral authority

14

In Halliburton an employee argued that
a
mandatory
arbitration clause was illusory because Halliburton, the employer,
had retained the right to modify or terminate the arbitration
agreement. Id. at 569. Rejecting this argument, the Texas Supreme
Court relied on two key provisions: One stated that "no amendment
shall apply to a Dispute of which the Sponsor [Halliburton] had
actual notice on the date of amendment"; the other stated that any
termination of the arbitration program "shall not be effective
until 10 days after reasonable notice of termination is given to
Employees or as to Disputes which arose prior to the date of
termination."
Id. at 569-70 (internal quotation marks omitted).
Because of this language, the court held that Halliburton could not
"avoid its promise to arbitrate" by amending or terminating the
agreement. Id. at 570. The agreement was therefore not illusory.
Id.
15

2017 License Agreement, Exhibit A-1 to Defendants' Motion to
Compel, Docket Entry No. 18-2, p. 7 ~ 15.
-7-

to "avoid its promise to arbitrate by amending the provision or
terminating it altogether."

Carey v. 24 Hour Fitness, USA, Inc.,

669 F.3d 202,

2012)

205

(5th Cir.

S.W.3d 564, 567 (Tex. 2010))

(quoting In re 24R,

Inc.,

324

Because Defendants do not have the

power to avoid arbitration under the 2017 License Agreement by
unilaterally changing its terms, the arbitration provision is not
illusory and the inclusion of a Halliburton-type savings clause is
not necessary.
2.

The Arbitration Provision is Unconscionable

Plaintiff

also

argues

that

the

Arbitration

Provision

is

unconscionable because it "impermissibly limits Shipman's right to
injunctive relief granted by the Lanham Act,
et seq.

15 U.S. C.

§

1051

Defendant responds that the Arbitration Provision

is not substantively unconscionable because its terms are "not a
complete restriction on Shipman's right to injunctive relief under
any circumstances," its remedies are cumulative to other remedies
provided at law,

and "Shipman points the Court to no authority

under the Lanham Act to suggest that its right to seek injunctive
relief

is

non-waivable

and

renders

unconscionable as a matter of law." 17

the

arbitration

agreement

Defendant argues that "[e]ven

if this Court finds that this restriction on injunctive relief [is]

16

Plaintiff's Response, Docket Entry No. 25, pp. 15-16.

17

Defendants' Reply, Docket Entry No. 26, pp. 8-9.
-8-

unconscionable under the Lanham Act,

the appropriate remedy is

severance. " 18
Unconscionability

includes

procedural

and

unconscionability . 19 Halliburton, 80 S. w. 3d at 571.
unconscionability
provision itself."

substantive

"[S] ubstantive

refers to the fairness of the arbitration
Id.

"A contract is unenforceable if, given the

parties' general commercial background and the commercial needs of
the particular trade or case, the clause involved is so one-sided
that it is unconscionable under the circumstances existing when the
parties made the contract."
337,

348

(Tex.

2008)

In re Poly-America, L.P., 262 S.W.3d

(quotations

and

citations

omitted) .

Arbitration provisions relating to federal statutory claims are
"valid so long as the arbitration agreement does not waive the
substantive

rights

and

arbitration

procedures

remedies
are

the

fair,

statute

such

that

the

'effectively vindicate his statutory rights.'"
S.W.3d at 349

(quoting Halliburton,

Mitsubishi Motors

Corp.,

105

S.

affords

and

the

employee

may

Poly-America, 262

80 S.W.3d at 572); see also

Ct.

at

3354

("By agreeing

to

arbitrate a statutory claim, a party does not forgo the substantive
rights afforded by the statute; it only submits to their resolution
in an arbitral, rather than a judicial, forum.");
Cooperative v.

18

Freeman,

435 S.W.3d 222,

229

(Tex.

Venture Cotton
2014)

(citing

Id. at 9.

19

Plaintiff does not argue that the arbitration provision is
procedurally unconscionable.
-9-

Poly-America, 262 S. W. 3d at 349)

("[I] t would be unconscionable for

an arbitration agreement to mandate arbitration of a
claim and at

the

same

time

afforded by the statute.").
of

statutory rights

eliminate

the

rights

statutory

and remedies

To determine whether the restriction

is permissible

underlying purpose of the statute.

the court must analyze

the

See Poly-America, 262 S.W.3d at

349-51.
Under the Lanham Act courts may "issue injunctions 'to prevent
the violation of any right of the registrant of a mark registered
in the Patent and Trademark office.'"
Civil Action No.
May 16, 2018)

3:17-1889-B,

Lanham

Act's

registered

2018 WL 2230623 at *2

(quoting 15 U.S.C.

contractually avoid

this

purpose

mark's

of

owner's

Mary Kay Inc. v. Anderson,

§

1116).

statutory

goodwill,

the

securing

the

protecting

ability to distinguish among competing products.
§

undermine

deception,
and

Tex.

Permitting a party to

remedy would

preventing

(N.D.

consumers'

See 15 U.S.C.

1127i Two Pesos, Inc. v. Taco Cabana, Inc., 112 S. Ct. 2753, 2760

(1992).

Because the Arbitration Provision prohibits Plaintiff from

seeking a statutory remedy, it is unconscionable and thus invalid.
However,

" [a] n

illegal

or

unconscionable

provision

of

a

contract may generally be severed so long as it does not constitute
the essential purpose of
S.W.3d at 230

the agreement."

(quoting Poly-America,

Venture

Cotton,

262 S.W.3d at 360).

435
"In

determining an agreement's essential purpose, the issue is 'whether
or not parties would have entered into the agreement absent the
-10-

unenforceable provisions.'"

The essential purpose of the

Arbitration Provision is to submit any dispute to an arbitral forum
rather than to a court.

See Poly-America,

262 S. W. 3d at 360.

Eliminating the unconscionable restriction on remedies will not
defeat

this purpose.

illegal

restriction

See id.
enhances

"In fact,
the

the

ability

lifting of

of

the

arbitration

provision to function fully and adequately under the law."
v. Bay, Ltd.,

344 F. 3d 474,

478

(5th Cir.

2003).

that

Hadnot

Plaintiff has

presented no evidence that it or Defendants would not have entered
into the Agreement absent the unenforceable portion.

Moreover, the

"Survival"

the

language

in

Paragraph

intent to arbitrate their disputes.
the

court

may

not

sever

the

15

demonstrates

parties•

Although Plaintiff argues that

unconscionable

portion

of

the

Arbitration Provision unless the Agreement contains a severability
clause, the Texas Supreme Court and the Fifth Circuit have allowed
severance

of

an

severability clause.

unconscionable

term

See Venture Cotton,

Hadnot, 344 F.3d at 478.

without

requiring

a

435 S.W.3d at 230-31;

The court concludes that the Arbitration

Provision's restriction on injunctive relief may be severed while
preserving the parties'
resolving disputes.

choice of arbitration as the forum for

See, e.g., Bonded Builders Home Warranty Ass'n

of Texas v. Rockoff, 509 S. W. 3d 523, 53 7 (Tex. App. 2016)

(" [T] he

arbitrator would be bound, as we would be, to follow Venture Cotton
Cooperative, strike the limitation on attorney's fees, and sever it
from the arbitration agreement.").
-11-

Therefore, the court will sever

the limitation of remedies from the Arbitration Provision.

The

arbitrator is authorized to award injunctive relief as well as
monetary damages for Plaintiff's claims under the Lanham Act.
Because the Arbitration Provision is not illusory and because
the court will sever the unconscionable remedies limitation from
the Arbitration Provision,

the court concludes that the parties

have entered into a binding agreement to arbitrate their dispute
and

that

no

federal

statute

or

policy

the

Scope

renders

the

claim

nonarbitrable.
C.

The Dispute
Agreement

Falls

Within

of

the

Arbitration

The court must next decide whether Plaintiff's claims fall
within

the

Provision.

scope

of

the

2017

License

Agreement's

Arbitration

Defendants argue that the broad Arbitration Provision

reaches all aspects of the relationship and covers every claim
Plaintiff has alleged. 20

Plaintiff responds that its claims of

tortious interference with prospective business relationships and
promissory estoppel can be maintained without reference to the 2017
License Agreement, and that its claims of trademark infringement
and unfair competition relate to conduct separate from Defendants'
obligations under the 2017 License Agreement. 21
"[C]ourts distinguish 'narrow' arbitration clauses that only
require arbitration of disputes 'arising out of' the contract from
20

Defendants' Motion to Compel, Docket Entry No. 18, p. 12.

21

Plaintiff's Response, Docket Entry No. 25, p. 18.
-12-

broad arbitration clauses governing disputes that 'relate to' or
'are

connected with'

the

contract."

Pennzoil

Exploration and

Production Co. v. Ramco Energy Ltd., 139 F. 3d 1061, 1067 (5th Cir.
1998).

Broad arbitration clauses "embrace all disputes between the

parties

having

a

significant

relationship

to

the

contract

regardless of the label attached to the dispute."

Id.

"[I]t is

only necessary that the dispute
[contract]

to be arbitrable."

'touch'

matters covered by the

Id. at 1068.

Moreover, the court

should not deny arbitration "unless it can be said with positive
assurance that an arbitration clause

is not

susceptible of an

interpretation which would cover the dispute at issue."
Inc. v. Petroleos Mexicanos Mexican National Oil Co.
F.2d 1140, 1145 (5th Cir. 1985)
The
applies

Arbitration
to

" [a] ny

all

(Pemex), 767

(quotations omitted).

Provision

and

Sedco,

in

the

disputes,

2017
claims

License
and

Agreement

controversies

arising out of or relating to any provision of this Agreement, or
breach or alleged breach thereof[.]" 22
all disputes

"relating to"

Because the clause governs

the Agreement

it must be construed

broadly to include disputes that "touch" matters covered by the
Agreement.

Plaintiff's promissory estoppel claim is "[b]ased on

the course of performance

for

the previous

includes the 2017 License Agreement. 23

five years,"

which

Because the claim relates

22

2017 License Agreement, Exhibit A-1 to Defendants' Motion to
Compel, Docket Entry No. 18-2, p. 6 ~ 12.
23

Amended Complaint, Docket Entry No. 14, p. 15
-13-

~

97.

to

the

Agreement,

Provision.

it

is

within

the

scope

of

the

Arbitration

In support of its tortious interference claim Plaintiff

alleges that

reasonable probability existed that Shipman and

~[a]

Blaze would enter into a License Agreement for the 2018 year but
for the actions of Cardon .
Shipman and the shows

I

[who]

spread[]

performance. 1124 Plaintiff

falsehoods about

Is

expectation that

it would execute a 2018 agreement arises from the parties' past
course of conduct,
Agreement.

including the execution of the 2017 License

Moreover,

the

~falsehoods

allegedly spread pertained to
shows. 1125

about Shipman, that Cardon

~demand

numbers

for the licensed

Because of the strong federal policy favoring arbitration

and because Plaintiff's tortious interference claim relates to the
2017 Agreement, this claim is within the scope of the arbitration
clause.

See DeStephano v.

F. App'x 103, *6

Broadwing Communications,

(5th Cir. 2002).

Inc.,

48

Plaintiff's federal and state

trademark infringement claims (Counts I-III) and unfair competition
claim

(Count

IV)

also

Plaintiff alleges that

relate

to

~Defendants

the

2017

License

Agreement.

continued use of The Registered

Marks after withdrawal and termination of the license is likely to
cause confusion .

24

Id. at 16

25

Id. at 9

26

Id. at 13

~~
~~
~

II

26

and that

101-102.
54-55.
82.
-14-

~Defendants'

actions have been

undertaken willfully and intentionally,

with the full knowledge

that Blaze no longer has a license to air the shows, . . . " 27
claims

are

based

on

Defendants'

airing

Plaintiff's

These

patented

television shows without permission after Plaintiff terminated the
2017 License Agreement.

All of the parties'

disputes therefore

fall within the broad scope of the arbitration clause.
D.

The Court will Dismiss Instead of Stay the Action

Under Section 3 of the Federal Arbitration Act, 9 U.S.C.

§

3,

"a stay is mandatory upon a showing that the opposing party has
commenced suit upon any issue referable to arbitration under an
agreement in writing for such arbitration
Witter

Reynolds,

(internal

Inc.,

quotations

975

F.2d

omitted).

1161,
"This

"
1164

rule,

Alford v. Dean
(5th

Cir.

however,

1992)

was

not

intended to limit dismissal of a case in the proper circumstances.
The weight of authority clearly supports dismissal of the case when
all of the issues raised in the district court must be submitted to
arbitration."

Id.

Because

the

court

has

concluded that

Plaintiff's claims must be submit ted to arbitration,

all

"retaining

jurisdiction and staying the action will serve no purpose."

Id.

The court will therefore dismiss rather than stay this action and
will compel arbitration.

27

Id. at 14

~ 89.

-15-

III.

Conclusion and Order

For the reasons set forth above, Defendants TheBlaze Inc. and
Tyler

Cardon's

Amended Motion

(Docket Entry No.

18)

to

is GRANTED.

Stay

and

Compel

Arbitration

But instead of staying this

action, the court will dismiss the action without prejudice.

The

court ORDERS that the provision in Paragraph 12 of the 2017 License
Agreement that limits Plaintiff's remedies to money damages is
SEVERED from the Agreement.
SIGNED at Houston, Texas, on this the 22nd day of June, 2018.

SIM LAKE
UNITED STATES DISTRICT JUDGE

-16-