LDS, INC. v. Metro Canada Logistics, Inc.

28 F. Supp. 2d 1297, 1998 U.S. Dist. LEXIS 19478, 1998 WL 865939
CourtDistrict Court, D. Kansas
DecidedNovember 23, 1998
DocketCIV. A. 98-2046-EEO
StatusPublished
Cited by2 cases

This text of 28 F. Supp. 2d 1297 (LDS, INC. v. Metro Canada Logistics, Inc.) is published on Counsel Stack Legal Research, covering District Court, D. Kansas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

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LDS, INC. v. Metro Canada Logistics, Inc., 28 F. Supp. 2d 1297, 1998 U.S. Dist. LEXIS 19478, 1998 WL 865939 (D. Kan. 1998).

Opinion

MEMORANDUM AND ORDER

EARL E. O’CONNOR, District Judge.

This matter is before the court on the motion of defendant Metro Canada Logistics, Inc. (“Metro”) to dismiss or stay this proceeding and enforce the arbitration agreement entered into between the parties (Doc. # 17). Plaintiff LDS, Inc. (“LDS”) has responded, and opposes the motion. Defendant has filed a reply. The court granted plaintiff leave to file a surreply, and the surreply has now been filed. The court has carefully considered the parties’ arguments and the applicable law, and is ready to rule. For the reasons set forth below, defendant’s motion will be granted.

I. Factual Background.

The following facts are gleaned from the pleadings and the parties’ briefs: Plaintiff LDS is a Lenexa, Kansas, computer software company, engaged in the business of creating and marketing specialty software. LDS developed a software for tracking warehouse inventory and transfer of goods. Defendant Metro is a Canadian corporation. In 1996, Metro entered into a contract with another Canadian company, Effem Foods, to operate its warehouse. Metro Canada and Effem Foods sought to use the LDS software to operate the warehouse.

In January of 1996, Metro and LDS entered into a Software License Agreement (“License Agreement”) and a software maintenance agreement (“the Code Maintenance Agreement”). The License Agreement granted Metro the right to use LDS’ software in accordance with the terms of the agreement. The License Agreement also contained an arbitration clause, which provided:

Except for the right of either party to apply to a court of competent jurisdiction for an interim or interlocutory injunction or other provision remedy to preserve the status quo or prevent irreparable harm pending selection of an arbitrator, any controversy or claim arising out of or relating to this Agreement shall be settled by arbitration in the United States in accordance with the rules of the American Arbitration Association by a single arbitrator appointed by the American Arbitration Association. The arbitrator shall have a background in the computer software technology and licensing and such other education and training to pass on the particular matter to be decided on. The written decision and reasons of the arbitrator shall be communicated to the parties not later that [sic] thirty (30) days after the close of argument in the arbitration.

The License Agreement was executed by Thomas C. Long, president of LDS, and Lawrence B. Wiesman, vice president, corporate development, of Metro. The agreement was drafted by LDS.

In January of 1998, LDS filed suit against Metro, alleging unauthorized use by Metro of the LDS software. In the complaint, LDS asserts claims for copyright infringement and breach of contract. Subsequently, Metro *1299 filed the instant motion seeking a dismissal or stay of the federal court proceedings and enforcement of the arbitration provision.

II. Standards for Arbitration.

The Federal Arbitration Act (“FAA”), 9 U.S.C. § 1-16, “evinces a strong federal policy in favor of arbitration.” ARW Exploration Corp. v. Aguirre, 45 F.3d 1455, 1462 (10th Cir.1995) (citing Shearson/American Express, Inc. v. McMahon, 482 U.S. 220, 226, 107 S.Ct. 2332, 96 L.Ed.2d 185 (1987)), cert. denied, — U.S. -, 119 S.Ct. 65, 142 L.Ed.2d 51 (1998). The purpose of the FAA “was to reverse the longstanding judicial hostility to arbitration agreements ... and to place arbitration agreements upon the same footing as other contracts.” Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991). “If a contract contains an arbitration clause, a presumption of arbitrability arises.” ARW, 45 F.3d at 1462 (citing AT & T Technologies, Inc. v. Communications Workers of America, 475 U.S. 643, 650, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986)). This presumption may be overcome only if “it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute.” Id. All doubts should be resolved in favor of coverage. Id. As the Supreme Court stated in Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 24-25, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983):

The Arbitration Act establishes that, as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability.

See also Esposito v. Hyer, Bikson & Hinsen, Inc., 709 F.Supp. 1020, 1022 (D.Kan.1988) (quoting Moses H. Cone, and noting that the Supreme Court has given its “stamp of approval” to the principle that arbitration provisions are to be construed broadly to effectuate the strong federal policy evidenced by the Federal Arbitration Act). Courts are to “rigorously” enforce agreements to arbitrate. ARW 45 F.3d at 1462 (citing McMahon, 482 U.S. at 226, 107 S.Ct. 2332).

Section 3 of the FAA provides:
If any suit or proceeding be brought in any of the courts of the United States upon any issue referable to arbitration under an agreement in writing for such arbitration, the court in which such suit is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration.

Thus, section 3 of the FAA requires a district court to stay judicial proceedings where a written agreement provides for the arbitration of the dispute. Section 4 provides that a party aggrieved by another party’s refusal to abide by an arbitration provision may petition a district court for an order compelling arbitration; if the court is “satisfied that the making of the agreement for arbitration or the failure to comply therewith is not in issue,” it must issue the requested order.

“The policy basis of [the FAA] is particularly strong in the context of international transactions.” Coors Brewing Co. v. Molson Breweries, 51 F.3d 1511, 1514 (10th Cir.1995) (citing

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28 F. Supp. 2d 1297, 1998 U.S. Dist. LEXIS 19478, 1998 WL 865939, Counsel Stack Legal Research, https://law.counselstack.com/opinion/lds-inc-v-metro-canada-logistics-inc-ksd-1998.