SOTI v. Impartner
Filing
30
ORDER denying 4 Motion for TRO; granting 20 Motion to Compel Arbitration. Signed by Judge Robert J. Shelby on 6/7/2018. (jwt)
IN THE UNITED STATES DISTRICT COURT
DISTRICT OF UTAH, CENTRAL DIVISION
SOTI, INC., a Canadian corporation,
ORDER DENYING MOTION FOR
TEMPORARY RESTRAINING ORDER
AND GRANTING MOTION TO COMPEL
ARBITRATION
Plaintiff,
v.
IMPARTNER, INC., a Delaware corporation,
Defendant.
Case No.: 2:18-CV-295
Judge: Robert J. Shelby
Before the court are two motions. Plaintiff SOTI moved for a temporary restraining
order, asking the court to enjoin arbitration proceedings commenced by Defendant Impartner.1
Impartner then filed a Motion to Compel Arbitration, asking the court to enforce an arbitration
provision in a contract with SOTI.2 For the reasons explained below, the court grants
Impartner’s Motion, and dismisses the case in favor of mandatory arbitration. SOTI’s
application for a temporary restraining order is denied.
BACKGROUND
This dispute arises out of a contract between SOTI and Impartner for the sale of software.
The central questions presented are whether the parties entered into a contract, and if so, whether
an arbitration provision was incorporated. The facts surrounding the formation of the contractual
relationship are complicated, but important to the issues presented. They are detailed here for
that reason.
On June 28, 2016, Steve Oates, an employee at Impartner, emailed SOTI’s procurement
manager, Sean McKay, about pricing proposals for Impartner’s relationship management
1
Dkt. 4.
2
Dkt. 20.
software.3 McKay responded on June 29, asking to delay discussing the proposal for a day.4
Oates explained that Impartner wanted to have an agreement for a sale of Impartner’s software
“signed by end of the quarter.”5 Oates stated that certain pricing incentives were available only
if a purchase order form was signed on or before June 30.6
McKay responded that completing the deal by June 30 would be “very difficult” because
a purchase order would first need to be presented to SOTI’s CEO for approval.7 Oates asked to
“go as fast as we can,” and suggested SOTI’s legal team begin looking at a draft Agreement.8
Oates also requested McKay send him the “commercial considerations” SOTI needed, including
pricing and terms.9 Later that day, Oates further proposed that McKay sign the Agreement
supplied by Impartner, leaving the purchase order number blank, and return it to Impartner while
SOTI worked “to turn around any redlines to the terms of use” and receive CEO approval. 10
Oates stated that if the parties later were unable to agree on pricing and terms, Impartner would
“tear up the order.”11 Oates sent McKay a letter stating that the Agreement “constitutes SOTI’s
commitment to the pricing, terms and conditions therein, pending CEO Approval on or before
Tuesday July 5th 2016.”12 The letter provided that “[s]hould the CEO decline approval, the order
is invalid and the signed Order Form will be shredded.”13 McKay ultimately sent Oates a signed
3
Dkt. 4, Ex. 1, at 5.
4
Id.
5
Id. at 4.
6
Id. at 4–5.
7
Id. at 4.
8
Id.
9
Id.
10
Id. at 3.
11
Id.
12
Dkt. 19, Ex. 5.
13
Id.
2
Agreement on June 30 and stated he would be in touch the following week after the Agreement
was approved by SOTI’s CEO.14
The signed Agreement stated three times that Impartner’s Terms of Use applied, and
provided a URL to access the Terms.15 In its demand for arbitration, Impartner submitted Terms
of Use that contain a provision titled “Arbitration,” which states that “[a]ny controversy or claim
arising out of or relating to this Agreement or the use of the Service shall be settled by
arbitration.”16
Following a mutually agreed extension of time for SOTI’s CEO review, on July 7,
McKay sent Oates “the signed agreement as discussed” and requested “a detailed invoice based
on these numbers” so that McKay could create a purchase order.17 Oates thanked McKay and
stated he would be in touch about the next steps and that Imparter was “looking forward to
starting.”18 That same day, Impartner’s CEO stated in an email to other Impartner employees
that he received a call from a SOTI employee stating that SOTI’s CEO “has signed the final
approval.”19
On July 19, Impartner’s accountant sent McKay an invoice “for set-up fees per contract
signed 06-30-2016.”20 After the accountant followed up twice in August and September, McKay
responded that he would discuss the invoice with Oates.21
14
Dkt. 4, Ex. 1, at 2.
15
Dkt. 4, Ex. 2, at 7, 9, 10.
16
Dkt. 4, Ex. 5, at 25.
17
Dkt. 19, Ex. 7.
18
Id.
19
Dkt. 21, Ex. 2.
20
Dkt. 19, Ex. 10, at 4.
21
Id.
3
Meanwhile, in July and August, employees from SOTI and Impartner emailed each other
several times about setting up a kickoff call and demonstration.22 Employees from both
companies also emailed about a presentation in which Impartner suggested SOTI include an
abstract stating that SOTI has selected a new partner relationship management portal from
Impartner.23
In September, McKay emailed Oates to raise concerns about a Statement of Work and its
relation to the licensing terms.24 In October, Mustafa Ebadi, who at the time was SOTI’s vice
president, emailed Oates and stated he “would still like to redo the contract once . . . our legal
team has signed off on the terms [and] conditions.”25 Ebadi expressed his understanding from
SOTI’s legal team was that “they are not signing off on this contract.”26
On January 20, 2017, a member of SOTI’s legal team emailed two employees at
Impartner and stated that the two companies’ CEOs had spoken the day before and come to a
“clear understanding” that “[t]he proposal dated June 30, 2016 expired on July 5, 2016” and that
the invoice dated July 19, 2016 should be voided.27
Impartner submitted a demand for arbitration on March 5, 2018.28 On April 9, SOTI
initiated this action, seeking declaratory judgment that no contract exists between the parties29
and issuance of a temporary restraining order enjoining arbitration.30 Impartner filed a Motion to
22
Dkt. 19, Ex. 8.
23
Dkt. 19, Ex. 9.
24
Dkt. 4, Ex. 9.
25
Dkt. 4, Ex. 11.
26
Id.
27
Dkt. 21, Ex. 4.
28
Dkt. 21, Ex. 5.
29
Dkt. 2.
30
Dkt. 4.
4
Compel Arbitration, asserting a valid contract exists that requires the parties to arbitrate.31 SOTI
represented in its Reply Memorandum that it is now seeking only a preliminary injunction and
not a temporary restraining order.32
LEGAL STANDARD
To show it is entitled to a temporary restraining order or preliminary injunction, SOTI
must establish “(1) a substantial likelihood of prevailing on the merits; (2) irreparable harm
unless the injunction is issued; (3) that the threatened injury outweighs the harm that the
preliminary injunction may cause the opposing party; and (4) that the injunction, if issued, will
not adversely affect the public interest.”33 “Because a preliminary injunction is an extraordinary
remedy, [the movant’s] right to relief must be clear and unequivocal.”34
Impartner, as the party seeking to compel arbitration, “has the burden to show that . . .
Arbitration Clauses exist and apply to” SOTI.35 If Impartner meets that initial burden, SOTI
“could attempt to rebut that showing with evidence establishing a genuine dispute as to whether
the provisions apply.”36 The court may grant a motion to compel arbitration where “there are no
genuine issues of material fact regarding the parties’ agreement,” giving the party resisting
arbitration “the benefit of all reasonable doubts and inferences that may arise.”37
31
Dkt. 20.
32
Dkt. 26 at 1.
33
Diné Citizens Against Ruining Our Env’t v. Jewell, 839 F.3d 1276, 1281 (10th Cir. 2016) (citation omitted).
34
Wilderness Workshop v. U.S. Bureau of Land Management, 531 F.3d 1220, 1224 (10th Cir. 2008) (citation
omitted).
35
Hancock v. Am. Tel. & Tel. Co., 701 F.3d 1248, 1261 (10th Cir. 2012).
36
Id.
37
Id. (citation omitted).
5
ANALYSIS
Both Impartner’s Motion to Compel Arbitration and the first prong of the preliminary
injunction analysis require the court to address whether the parties entered into a contract with an
arbitration provision.
Before deciding whether a dispute is arbitrable, the court must first determine who should
decide arbitrability—the court or an arbitrator.38 In making this decision, the court looks to the
language of the arbitration provision at issue. However, in this case, the parties dispute whether
the arbitration provision is even incorporated into the signed Agreement. Thus, in order to reach
the issue of whether the arbitration provision evinces the parties’ intent to arbitrate arbitrability,
the court must first address incorporation.
I.
Incorporation
SOTI argues the Terms of Use document that contains the arbitration provision is not
incorporated into the Agreement for several reasons.
First, SOTI argues there is no evidence the URL in the Agreement contained the same
Terms of Use—including an arbitration provision—that Impartner later provided in its demand
for arbitration.
The Agreement references the Terms of Use three times and provides a URL:
http://www.impartner.com/terms-of-use.aspx. In its Reply in support of the Motion to Compel
Arbitration, Impartner submitted evidence by affidavit that the Terms of Use available at that
URL on the date SOTI signed the Agreement contained the same arbitration provision as the
Terms of Use that Impartner submitted in its demand for arbitration.39 In contrast, SOTI has
submitted no evidence that the Terms of Use available at the URL on the date it signed the
38
Belnap v. Iasis Healthcare, 844 F.3d 1272, 1281 (10th Cir. 2017).
39
Dkt. 28.
6
Agreement did not contain the same arbitration provision. Accordingly, no genuine issue of fact
exists as to whether the Terms of Use referenced in the Agreement was the same document
submitted in Impartner’s demand for arbitration.
Second, SOTI argues the Agreement lacked sufficiently specific language to incorporate
the Terms of Use by reference. “Incorporation by reference requires that the reference . . . be
clear and unequivocal, and alert the non-drafting party that terms from another document are
being incorporated.”40 SOTI argues the Agreement’s references to the Terms of Use are
references only to what a future contract would cover.
The Agreement includes three references to the Terms of Use. The first states that an
“[a]greement to abide by the Services Terms of Use” is part of the requirements for the
purchasing company, and it includes the URL to the Terms of Use.41 The second reference states
that “[a]ll licenses are subject to Terms of Use” and again provides the URL.42 The third
reference, which is almost directly above the signature line on the last page of the Agreement,
states that “You agree to abide by Terms of Use for each Impartner licensed product.”43 These
three references clearly and unequivocally incorporate the Terms of Use into the Agreement.
There is no language in the references to the Terms of Use that supports an inference they were
intended only as part of a future contract.
Third, SOTI argues it never specifically consented to the Terms of Use. However, SOTI
has pointed to no facts that would create a genuine dispute on this issue. Impartner invited SOTI
to propose changes to the Terms of Use if it disagreed with them. Had SOTI disagreed with the
40
Peterson & Simpson v. IHC Health Servs., Inc., 2009 UT 54, ¶ 15, 217 P.3d 716 (alteration in original) (citation
omitted).
41
Dkt. 4, Ex. 2, at 7.
42
Id. at 9.
43
Id. at 10.
7
Terms, it had the ability to refuse to sign the Agreement. Instead, SOTI raised no disagreement
with the Terms and signed the Agreement incorporating the Terms without further negotiation.
Thus, there is no genuine dispute as to SOTI’s consent to the Terms of Use.
Fourth, SOTI argues the Terms of Use itself implies the parties intended the document to
be a separate contract because the version Impartner emailed SOTI contains a separate signature
block. However, the version of the Terms of Use that Impartner states was available at the URL
does not contain a signature block. In any case, a signature block does not negate the clear and
unequivocal language of incorporation in the Agreement. Thus, any signature block does not
create a genuine dispute of material fact as to incorporation.
Given Impartner’s showing that the Terms of Use contained the arbitration provision on
the date SOTI signed the Agreement and the language of incorporation, the court concludes no
genuine dispute of material fact exists as to whether the arbitration provision was incorporated
into the Agreement.
SOTI concedes that if it did agree to the arbitration provision, it has agreed to arbitrate
arbitrability and would need to present its remaining arguments to an arbitrator, not this court.44
However, SOTI argues the arbitration provision is not binding because it is not part of a valid
and enforceable contract. SOTI asserts the Agreement was not a valid contract because it did not
contain or incorporate a Statement of Work, which SOTI argues is a material term.
II.
Valid and enforceable contract
The court is tasked with considering “only issues relating to the making and performance
of the agreement to arbitrate,” not the contract as a whole.45 The Supreme Court applied this rule
in Prima Paint v. Flood & Conklin Manufacturing, stating that because a claim of fraudulent
44
Dkt. 26 at 1–2.
45
Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 404 (1967).
8
inducement implicated the contract generally and not just the arbitration provision, an arbitrator
should decide the issue.46 The Supreme Court reaffirmed this rule in Buckeye Check Cashing v.
Cardegna, in which one party argued a contract was void because it violated state lending and
consumer protection laws.47 The Court held that challenge was “to the validity of the contract as
a whole, and not specifically to the arbitration clause,” and therefore must go to the arbitrator.48
The Tenth Circuit has also applied this rule. In In re Cox Enterprises, Inc. Set-top Cable
Television Box Antitrust Litigation, a party sought to have the court decide whether a contract
was unenforceable because it lacked consideration.49 The Tenth Circuit concluded that because
the argument was directed toward the contract as a whole, it must be resolved by an arbitrator.50
The Supreme Court has distinguished this general rule from cases in which a party
alleges it never signed the contract, lacked the authority to sign, or lacked the mental capacity to
assent.51 However, the facts of this case do not appear to fit within any of these exceptions.
Rather, SOTI’s argument that a contract lacks an essential term is similar in nature to the
argument in Cox that the contract lacked consideration. The court recognizes that the holding of
Cox was raised late in the hearing and that the parties did not brief its application to this case.
However, it appears clear from Cox that binding case law mandates arbitration for SOTI’s
argument about a missing essential term.52
46
Id.
47
546 U.S. 440, 443 (2006).
48
Id. at 449.
49
835 F.3d 1195, 1209 (10th Cir. 2016).
50
Id. at 1211.
51
Buckeye Check Cashing, 546 U.S. at 444 n.1.
52
In any case, even if I were to decide the issue of whether an essential term is missing from the Agreement, I would
conclude the Statement of Work was not a material term and thus a valid contract existed that requires arbitration.
9
The issue of whether the Agreement lacks a material term attacks the contract as a whole,
not just the arbitration provision. For this reason, the court concludes the issue of whether the
Agreement contains all essential terms must be resolved by an arbitrator.
CONCLUSION
Impartner’s Motion to Compel Arbitration is GRANTED.53 SOTI’s Motion for
Temporary Restraining Order is DENIED.54 The Clerk of Court is ORDERED to close the case.
SO ORDERED this 7th day of June, 2018.
BY THE COURT:
________________________________________
ROBERT J. SHELBY
United States District Judge
53
Dkt. 20.
54
Dkt. 4.
10
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