Derse Inc v. Haas Outdoors Inc

Filing 24

ORDER signed by Judge J P Stadtmueller on 7/21/09 granting in part and denying in part 10 defendant's motion to stay this action and to compel arbitration; parties are to proceed with arbitration on the plaintiffs claims arising out of the agr eements described in this order in the manner provided for in the arbitration clauses of those agreements; staying this case pending the outcome of arbitration; the parties shall notify the court in writing of the resolution of arbitration. See Order. (cc: all counsel) (nm)

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF WISCONSIN
____________________________________________ D E R S E , INC., Plaintiff, v. H A A S OUTDOORS, INC., D e fe n d a n t. ____________________________________________ C a s e No. 09-CV-97

ORDER
O n January 22, 2009, plaintiff Derse, Inc. ("Derse") filed a summons and c o m p la in t in Milwaukee County Circuit Court against defendant Haas Outdoors, Inc. ("H a a s ") alleging that Haas failed to pay certain fees under multiple lease and s e rvic e s agreements. On January 29, 2009, Haas removed the case to the United S ta te s District Court for the Eastern District of W is c o n s in . The court has jurisdiction o ve r this matter by virtue of the parties' diversity of citizenship and an amount in c o n tro ve rs y well in excess of $75,000.00. See 28 U.S.C. § 1332. Shortly after filing its notice of removal, Haas filed a motion to compel arbitration and stay this action p u rs u a n t to the Federal Arbitration Act, and specifically 9 U.S.C. §§ 2-4. B AC K G R O U N D In September of 2006, Derse, a manufacturer of trade show exhibits and re la te d services, and Haas, a purveyor of camouflage products under the brand n a m e "Mossy Oak", entered into a lease agreement ("2006 Lease") for the purposes o f providing an exhibit booth at multiple Shooting, Hunting and Outdoor Trades

(" S H O T ") shows. Under the 2006 Lease, Derse was to lease Haas an exhibit s tru c tu re for Haas to promote Mossy Oak products at the SHOT shows for 2007 th ro u g h 2011. In exchange, Haas agreed to pay Derse rent as provided under the 2 0 0 6 Lease. The 2006 Lease contains no arbitration clause. (Compl. Ex. A). In May of 2007, the parties entered into a second lease agreement ("May 2007 L e a s e " ) in which Derse agreed to provide Haas with certain additional exhibit c o m p o n e n ts for the SHOT trade shows, including special doors, walls, an aroma m a c h in e emitting "fireplace" scent, and multiple antler chandeliers. The May 2007 L e a s e listed the additional rent due to Derse for these exhibit accessories, but did n o t include an arbitration clause. (Compl. Ex. B). In September of 2007, the parties negotiated three more agreements e xp a n d in g the contours of their business relationship. The first of these agreements ("F irs t Addendum"), dated September 19, 2007, purports to amend the 2006 Lease to include additional accoutrements for the SHOT trade show exhibit, including s lid in g barn wood doors, a firepit and several graphics panels. (Compl. Ex. C). The F irs t Addendum to the 2006 Lease does not include an arbitration clause. The second agreement ("ATA Lease"), also dated September 19, 2007, c re a te s a separate lease for a Mossy Oak exhibit at the Archery Trade Association ( "A T A " ) trade shows for 2008 through 2011. Under the ATA Lease, Derse once a g a in agreed to provide an exhibit package in exchange for a set rental fees. (C o m p l. Ex. D). The ATA Lease does not include an arbitration clause.

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The third agreement ("NW T F Lease") dated September 19, 2007, creates a le a s e for a Mossy Oak exhibit package at the National W ild Turkey Federation ("N W T F " ) trade shows for 2008 through 2011. (Compl. Ex. E). The parameters of th e NW T F Lease appear to be similar in substance to those of the ATA Lease, with D e r s e providing Haas an exhibit package for fixed rental fees. The NW T F Lease d o e s not include an arbitration clause. A lso in September of 2007, Haas requested arbitration clauses be added to c o ve r all of the parties' agreements. Derse apparently did not oppose Haas's re q u e s t. Derse drafted versions of the First Addendum, the ATA Lease and the N W T F Lease to include arbitration clauses, signed the drafts and provided them to H a a s on or about September 12, 2007. (English Decl. Exs. 1, 5 and 6, Docket #11). T h e parties dispute what happened next. Derse claims that Haas, having two drafts o f each of the aforementioned agreements, signed only the versions of those a g re e m e n ts that did not include arbitration clauses and returned them to Derse on o r about September 21, 2007. Haas claims that the drafts containing the arbitration c la u s e s became effective upon Derse's signature and superceded the First A d d e n d u m , the ATA Lease and the NW T F Lease. W h a t is clear from the face of th e s e documents is that the versions with arbitration clauses are undated and signed o n ly by Derse, while the versions without arbitration clauses are signed by both p a rtie s and dated September 19, 2007.

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T h e parties continued to consummate additional agreements into the fall of 2 0 0 7 . In October of 2007, the parties entered into a Community Lease Agreement (" C o m m u n ity Lease"). In the Community Lease, Derse agreed to provide an exhibit p a c k a g e for use by unnamed licensees of Haas in the SHOT trade shows for 2008 th r o u g h 2011. (Compl. Ex. F). The Community Lease includes an arbitration clause w h ic h states the following: A n y and all disputes, controversies or claims of any kind and nature a ris in g out of or relating to this Lease Agreement shall be resolved, e x c lu s ive ly , by arbitration in accordance with the Federal Arbitration Act (9 U.S.C. Section 1 Et. Seq.). Said arbitration shall be governed by the ru le s and procedures of the American Arbitration Association and shall b e held in New Orleans, Louisiana before a panel of three (3) a r b itra to r s . (C o m p l. Ex. F ¶ 7). T h e parties also contracted separately for services related to the Mossy Oak e x h ib its . Derse refers to these agreements as "budgetary guidelines." The first b u d g e ta ry guideline ("SHOT Budget"), dated November 16, 2007, outlines the s e rvic e s Derse agreed to provide for Haas's Mossy Oak exhibit at the 2008 SHOT tra d e show, including transportation, installation, maintenance, support and d is m a n tlin g . (Martin Decl. Ex. G, Docket #19). The SHOT Budget includes the fo llo w in g arbitration clause: Except for the right of either party to apply to a court of competent ju ris d ic tio n for a temporary restraining order, a preliminary injunction, o r other equitable relief to preserve the status quo or prevent irre p a ra b le harm, any controversy or claim arising out of or related to th is Agreement or to its breach shall be settled by final and binding a rb itra tio n by a single arbitrator in accordance with Commercial -4-

A rb itra tio n Rules of the American Arbitration Association, pursuant to a n arbitration held in Jackson, Mississippi, and judgment upon the a w a rd rendered by the arbitrator may be entered in any court of c o m p e te n t jurisdiction. Each party shall bear its own costs and attorney fee s related to any arbitration proceeding hereunder. (M a rtin Decl. Ex. G General Conditions ¶ 17, Docket #19). T h e second budgetary guideline ("SHOT Licensee Budget"), also dated N o ve m b e r 16, 2007, outlines the services Derse agreed to provide to Haas for its lic e n s e e s exhibit at the 2008 SHOT trade show. (Martin Decl. Ex. H, Docket #19). T h e SHOT Licensee Budget includes an arbitration clause with language identical to that of the SHOT Budget. (Martin Decl. Ex. H General Conditions ¶ 17, Docket # 1 9 ). F in a lly , on or about January 17, 2008, the parties executed a price quotation ( "P r o p s Quote") for additional items to be included in the 2008 SHOT trade show e xh ib it. According to the Props Quote, Derse was to provide Haas with ten full body a rtic u la tin g mannequins and four literature racks. (Martin Decl. Ex. I, Docket #19). T h e Props Quote does not include an arbitration clause. AN AL Y S IS T h e Federal Arbitration Act ("FAA") allows a party to an arbitration agreement to petition the district court to compel arbitration in the manner provided for in the a g re e m e n t. 9 U.S.C. § 4. If a case pending in the district court involves issues re fera b le to arbitration under an arbitration agreement, a party may move the court to stay the proceedings pending arbitration of those issues. 9 U.S.C. § 3. In order

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to determine whether a binding arbitration agreement exists, the court must look to p rin c ip le s of state contract law. Tinder v. Pinkerton Security, 305 F.3d 728, 733 (7th C ir. 2002); see 9 U.S.C. § 2 (mandating enforceability of valid written arbitration a g re e m e n ts ). Here, although the parties omit any choice of law discussion from their briefs, it appears that W is c o n s in contract law applies. In all of their agreements, with the e xc e p tio n of the budgetary guidelines and quotation of services, the parties explicitly c h o s e W isc o n s in law to govern. See Designer Direct, Inc. v. DeForest Redev. Auth., 3 1 3 F.3d 1036, 1041 (7th Cir. 2002) (looking to choice of law provision to determine w h ic h state's law applied to contract dispute). Moreover, based on W is c o n s in 's c h o ic e of law rules, W is c o n s in appears to have the most contacts with respect to the p a rtie s ' agreements. See Sybron Transition Corp. v. Security Ins. Co., 107 F.3d 1 2 5 0 , 1255 (7th Cir. 1997) (discussing W is c o n s in 's "grouping-of-contacts approach" to choice of law in contract cases). W is c o n s in law views arbitration agreements as it does other contracts. See W is . Auto Title Loans, Inc. v. Jones, 714 N.W.2d 155, 159, 163 (W is . 2006). T h e re fo re , a court interpreting such agreements must consider the intent of the p a rtie s . See FPL Energy Point Beach, LLC v. Energy Resources of Australia Ltd., 5 6 5 F.Supp.2d 999, 1004 (W .D .W is . 2008) (citation omitted). W h e n the contract la n g u a g e is unambiguous, "determining the parties' intent ends with the four corners o f the contract." Id. (quoting Huml v. Vlazny, 716 N.W.2d 807, 820 (W is . 2006)).

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W h e n e ve r possible, terms of a contract should be given their ordinary or plain m e a n in g . See id. W isc o n s in law presumes arbitration provisions to be valid. Wis. A u to Title Loans, Inc., 714 N.W .2 d at 163-64. Derse does not dispute that it agreed to arbitrate controversies arising out of o r related to the Community Lease, the SHOT Budget and the SHOT Licensee B u d g e t. These agreements represent the leasing of an exhibit for Haas's licensees, a n d the services Derse was to render at the 2008 SHOT trade show. Because D e r s e does not question the validity of these agreements, and in fact seeks to e n fo rc e them through this action, the court is obliged to compel arbitration with re s p e c t to the amounts Derse alleges are owing thereunder in a manner consistent w ith the arbitration clauses contained therein. T h e key question for the court is whether the parties agreed to arbitrate c o n tro ve rs ie s arising from or related to their other agreements, namely the 2006 L e a s e , the May 2007 Lease, the First Addendum, the ATA Lease, the NW T F Lease a n d the Props Quote. Haas claims they did, and directs the court to the versions of F irs t Addendum, the ATA Lease and the NW T F Lease which include arbitration c la u s e s . In the alternative, Haas argues that even if the parties did not include a r b itra tio n clauses in each of their written agreements, the court should nonetheless re a d all of the agreements together and construe them as a single contract. Derse a rg u e s that it should not be compelled to arbitrate its claims relating to the a g r e e m e n t s with no arbitration clauses.

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H a a s does not challenge the validity of the 2006 Lease, the May 2007 Lease, th e First Addendum, the ATA Lease or the NW T F Lease. Those agreements all s ta te unequivocally that they "may be modified only in writing, signed by both p a rtie s ." Yet, Haas claims that three undated documents, signed only by Derse, m o d ify those agreements to include arbitration clauses. The court is not convinced. N o r is the court prepared to read arbitration clauses into all of the parties' a g r e e m e n t s at issue in this case. Even if the court were to construe the parties' m yria d agreements as one, Haas has not demonstrated that a broad arbitration c la u s e would necessarily be included in that construction. W h ile federal policy fa vo rs arbitration agreements, arbitration "is a matter of consent, not coercion and th e parties are generally free to structure their arbitration agreements as they see fit and may limit by contract the issues which they will arbitrate." Volkswagen of Am., In c . v. Sud's of Peoria, Inc., 474 F.3d 966, 970 (7th Cir. 2007) (citations and internal q u o ta tio n marks omitted). Since Haas has failed to show that the parties agreed to a rb itra te the claims Derse raises in this case with respect to the 2006 Lease, the F irst Addendum, the ATA Lease, the NW T F Lease and the Props Quote, the court la c k s the power to compel arbitration of those claims. See 9 U.S.C. § 4. The court will, however, stay all proceedings in this case pending the re s o lu tio n of all arbitrable claims. W h e n e ve r a case includes both arbitrable and n o n -a r b itra b le claims or issues, the court may, in its discretion, stay the entire case o r proceed with the non-arbitrable claims. Volkswagon of Am., Inc., 474 F.3d at 971.

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T h e court should stay the entire case if staying only the arbitrable claims while p ro c e e d in g with the non-arbitrable claims "risks inconsistent rulings because the p e n d in g arbitration is likely to resolve issues material to the lawsuit." Id. at 972. In c o n s id e r in g whether to stay the entire case, the court must consider not only the risk o f inconsistent rulings, but also the extent to which the parties are bound by the a r b itra tio n , and the prejudice that may result from delay. Id. Here, the risk of in c o n s is te n t rulings is real since the parties' overall dispute involves one common e n te rp ris e , the Mossy Oak trade show exhibit, and all of Derse's claims involve the m a te ria l issue of whether Derse and Haas fulfilled their agreed-to obligations in that c o m m o n enterprise. Based on the arbitration agreements, the parties would also be b o u n d by an arbitrator's decision on this issue. Derse has not claimed it would suffer p re ju d ic e from any delay in this case, and the court has no independent basis on w h ic h to find prejudice. Therefore, given the circumstances of this case, the court f in d s the most appropriate and efficient course of action is to stay the entire case p e n d in g arbitration. It is the court's hope that arbitration might help resolve, or shed lig h t on, the issues that remain for the court's consideration. See id. Accordingly, IT IS ORDERED that defendant's motion to stay this action and to compel a rb itra tio n (Docket #10) be and the same is hereby GRANTED in part and DENIED in part;

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IT IS FURTHER ORDERED that the parties are to proceed with arbitration on th e plaintiff's claims arising out of the agreements described in this order as the C o m m u n ity Lease, the SHOT Budget and the SHOT Licensee Budget in the manner p ro vid e d for in the arbitration clauses of those agreements. IT IS FURTHER ORDERED that this case be and the same is hereby S T AY E D pending the outcome of arbitration; the parties shall notify the court in w ritin g of the resolution of arbitration when one has been reached. D a te d at Milwaukee, W is c o n s in , this 21st day of July, 2009. BY THE COURT:

J .P . Stadtmueller U .S . District Judge

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