AffiniPay, LLC v. Abacus Data Systems, Inc.
ORDER GRANTING 8 Motion to Compel. AffiniPays claims are STAYED pending arbitration. The parties shall file a joint status reports detailing the status of the arbitration proceedings on June 11, 2018, and every 60 daysthereafter. Signed by Judge Robert Pitman. (td)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
ABACUS DATA SYSTEMS, INC.,
Before the Court is Defendant Abacus Data Systems, Inc.’s (“Abacus”) Motion to Compel
Arbitration, (Dkt. 8), along with the parties’ responsive briefing. After considering the parties’
arguments and the relevant law, the Court agrees with Abacus that arbitration is proper.
Plaintiff AffiniPay, LLC (“AffiniPay”) is an electronic payments company that contracted
with Abacus, a practice management and billing company, to receive client referrals. (Contract, Ex.
A-1, Dkt. 8, at 11). AffiniPay alleges that Abacus sent a defamatory marketing email in which it
stated that AffiniPay fails to use appropriate security protocols. (Compl., Dkt 1, at 4–5). AffiniPay
asserts several causes of action that sound in tort: defamation, business disparagement, and tortious
interference. (Id. at 8–12). Abacus argues that AffiniPay’s claims fall within the scope of the
arbitration clause in the referral contract (“the Contract”) and asks the Court to compel arbitration.
(Mot. Compel, Dkt. 8).
II. LEGAL STANDARD
The Federal Arbitration Act permits a party to file a motion to compel arbitration based on
“the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for
arbitration.” 9 U.S.C. § 4. “There is a strong presumption in favor of arbitration.” Carter v.
Countrywide Credit Indus., Inc., 362 F.3d 294, 297 (5th Cir. 2004). This presumption applies “unless it
may be said with positive assurance that the arbitration clause is not susceptible of an interpretation
that covers the asserted dispute. Doubts should be resolved in favor of coverage.” Houston Ref., L.P.
v. United Steel, Paper & Forestry, Rubber, Mfg., 765 F.3d 396, 412 (5th Cir. 2014) (citing AT & T Techs.,
Inc. v. Commc’ns Workers of Am., 475 U.S. 643, 650 (1986)). Because of this presumption, the burden
lies with “the party opposing arbitration to demonstrate either that the agreement is invalid or, at a
minimum, to allege the dispute is outside of the agreement’s scope.” Grant v. Houser, 469 F. App’x
310, 315 (5th Cir. 2012). While state law governs the question of whether there exists a valid
agreement to arbitrate, the “federal substantive law of arbitrability” applies to the question of
whether a particular dispute falls within the scope of an arbitration agreement. Graves v. BP Am., Inc.,
568 F.3d 221, 222–23 (5th Cir. 2009). When deciding whether a claim falls within the scope of an
arbitration agreement, a court should “focus on factual allegations in the complaint rather than the
legal causes of action asserted.” Jones v. Halliburton Co., 583 F.3d 228, 240 (5th Cir. 2009).
Determining whether to enforce an arbitration clause involves two steps: (1) “whether the
parties entered into an arbitration agreement at all,” and (2) “whether the dispute at issue is covered
by the arbitration agreement.” Archer & White Sales, Inc. v. Henry Schein, Inc., 878 F.3d 488, 492 (5th
Cir. 2017) (citation and quotation marks omitted). Before the second step, a court must also
determine “who should have the power to decide” whether a claim is arbitrable. Id. (citation and
quotation marks omitted). “Unless the parties clearly and unmistakably provide otherwise, the
question of whether the parties agreed to arbitrate is to be decided by the court, not the arbitrator.”
AT & T Techs., 475 U.S. at 649. A contract “need not contain an express delegation clause to meet”
the “clearly and unmistakably” standard. Archer & White, 878 F.3d at 493. “An arbitration agreement
that expressly incorporates the AAA Rules presents clear and unmistakable evidence that the parties
agreed to arbitrate arbitrability.” Id. (citation and quotation marks omitted).
Here, there is no question that an arbitration clause exists. (See Resp. Mot. Compel, Dkt. 10,
at 3). The question is whether AffiniPay’s claims fall within the scope of the Contract’s arbitration
clause. That provision reads:
16. Disputes. To the extent that a dispute cannot be resolved in a friendly manner
between the parties, the dispute shall be settled by arbitration in Texas under the
Commercial Arbitration Rules of the American Arbitration Associations or by
services rendered by the American Dispute Resolution Center at the election of the
party filing the arbitration; provided, however, regardless of the dispute resolution
forum selected or the rules governing the same, (i) any dispute shall be resolved by
one arbitrator, and (ii) Judgment on the arbitration award may be entered in any
court having jurisdiction over the subject matter of the controversy.
(Contract, Ex. A-1, Dkt. 8, at 17). Also relevant to the parties’ dispute over the application of the
Contract’s arbitration clause to AffiniPay’s claims is a non-disparagement clause that reads:
c. Non-Disparagement. Each party represents that it will conduct its business in a
manner that reflects favorably on the quality image of the other party and its
products and services. Neither party shall disparage the other party or its affiliates or
their products or services.
(Id. at 15).
Abacus argues that AffiniPay’s claims, while characterized as tort claims, are in substance
allegations of disparagement that fall within the scope of the Contract’s non-disparagement clause.
(Mot. Compel, Dkt. 8, at 4). In support of its argument, Abacus points to correspondence from
AffiniPay executives and counsel accusing Abacus of violating the Contract’s non-disparagement
clause. (Id. (citing Letter, Dkt. 1-4, at 3 (“Abacus’s false and defamatory statements in the Abacus
Advertisement are in clear breach of the disparagement provision, Part 6(c) of the Referral and
Royalty Agreement between Abacus Data Systems and Affini[P]ay LLP.”))). AffiniPay, meanwhile,
responds that its claims fall outside the scope of the arbitration agreement because the clause is
narrow and none of the claims arise out of the Contract. (Resp. Mot. Compel, Dkt. 10, at 4–9).
The Fifth Circuit distinguishes narrow arbitration clauses “that only require arbitration of
disputes ‘arising out of’ the contract” from broad arbitration clauses governing disputes “that ‘relate
to’ or ‘are connected with’ the contract.” Pennzoil Expl. & Prod. Co. v. Ramco Energy Ltd., 139 F.3d
1061, 1067 (5th Cir. 1998). If an arbitration clause is broad, “the action should be stayed and the
arbitrators permitted to decide whether the dispute falls within the clause.” Complaint of Hornbeck
Offshore (1984) Corp., 981 F.2d 752, 754 (5th Cir. 1993). The Fifth Circuit has repeatedly held that
arbitration clauses that apply to “any dispute” are broad. Id.; see also Sedco v. Petroleos Mexicanos Mexican
Nat’l Oil, 767 F.2d 1140, 1144–45 (5th Cir. 1985) (holding that an arbitration clause applying to “any
dispute or difference between the parties” was broad).
The arbitration clause in this case applies simply to “disputes.” (Contract, Ex. A-1, Dkt. 8, at
17). If “a dispute” cannot be resolved, then “the dispute” shall be settled by arbitration. (Id.).
AffiniPay argues that the parties are sophisticated enough to know how to write a broad arbitration
clause and that their failure to do so indicates an intention to construe the clause narrowly. (Resp.
Mot. Compel, Dkt. 10, at 5). Of course, even assuming the premise of AffiniPay’s argument to be
true, it cuts both ways—sophisticated parties presumably also know how to write a narrow
arbitration clause, but the Contract’s clause lacks language limiting the clause’s scope to claims
“arising out” of the contract. Lacking such language, the clause applies to disputes without any
apparent limitation, similar to the broad provisions in Hornbeck Offshore and Sedco. At best, the
clause’s scope is ambiguous, and the Court must resolve that ambiguity in favor of arbitration. The
Court therefore finds the arbitration clause to be broad, which requires the Court to stay the case
and permit an arbitrator to determine the clause’s scope. Hornbeck Offshore, 981 F.2d at 754.
Moreover, the arbitration clause “expressly incorporates the AAA Rules,” which the Fifth Circuit
considers to be “clear and unmistakable evidence that the parties agreed to arbitrate arbitrability.”
Archer & White, 878 F.3d at 493. For both of these reasons, the Court holds that the scope of the
arbitration clause and its application to AffiniPay’s claims must be determined by an arbitrator.
For these reasons, IT IS ORDERED that Abacus’ Motion to Compel Arbitration, (Dkt. 8),
is GRANTED. AffiniPay’s claims are STAYED pending arbitration. The parties shall file a joint
status reports detailing the status of the arbitration proceedings on June 11, 2018, and every 60 days
SIGNED on April 11, 2018.
UNITED STATES DISTRICT JUDGE
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