Personal Communications Devices, LLC v. HTC America Inc.

40 Misc. 3d 790
CourtNew York Supreme Court
DecidedJune 24, 2013
StatusPublished
Cited by2 cases

This text of 40 Misc. 3d 790 (Personal Communications Devices, LLC v. HTC America Inc.) is published on Counsel Stack Legal Research, covering New York Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Personal Communications Devices, LLC v. HTC America Inc., 40 Misc. 3d 790 (N.Y. Super. Ct. 2013).

Opinion

OPINION OF THE COURT

Emily Pines, J.

Petitioner Personal Communications Devices, LLC (PCD) moves, by order to show cause (motion sequence No. 001), for an order permanently staying the arbitration entitled HTC Am., Inc., and HTC Corp. v Personal Communications Devices, LLC (case No. 50 494 T 00313 13), currently pending before the American Arbitration Association, International Centre for Dispute Resolution. The respondents, HTC America Inc. and HTC Corporation (respondents or HTC), began the arbitration, seeking to recover payment for products HTC delivered to PCD for the period between April 2011 and March 2013. It is PCD’s contention that such products were defective, entitling PCD to offsets as well as its own damages. The respondents oppose the [792]*792instant motion and argue that this matter should proceed to arbitration. The arguments of the parties are set forth below.

Petitioner asserts that, while it recognizes a strong federal policy favoring arbitration,1 the policy is grounded on the condition that the parties involved have consented to such a process. In this case, PCD asserts that: (1) as the entity that merely purchased the assets of a signatory to a supplier agreement, originally entered into in 2003 and amended by an addendum in 2006, it never consented to arbitration; (2) the agreement to arbitrate, even if PCD is deemed a party thereto, expired three years before the alleged payment defaults that are the subject matter of the parties’ disputes occurred; and (3) subsequent agreements between the parties hereto, which constitute purchase orders for items that are at the heart of the parties’ dispute, all specifically require resolution before a court located in Suffolk County, New York. Since the party seeking arbitration bears the burden, under New York law, of proving the existence of arbitration, and PCD never signed the initial supplier agreement, which is the only document setting forth an arbitration provision, it is PCD’s assertion that HTC cannot sustain its burden of demonstrating that PCD falls within any of the limited exceptions to the federal rule requiring consent (such being assumption, incorporation by reference, agency, veil piercing, and/or estoppel). PCD also argues that a court has the authority to determine both whether a dispute is arbitrable and, in making such decision, to address whether such agreement has, in fact, been terminated.

Respondents support the strong federal policy favoring enforcement of arbitration agreements. However, it is here that the parties’ agreement ends. According to HTC, PCD is bound by the terms of the supplier agreement as a successor by merger to a signatory. As such, it is asserted that PCD is liable for all the contractual obligations of its predecessor under New York law.2 In this case, the original signatory, Audiovox, assigned its rights and obligations to an entity called UTStarcom, which specifically undertook to assume all obligations under Audiovox’s supplier agreement. Then, effective July 1, 2008, according to respondents, UTStarcom merged with and into PCD, which has publicly set forth that it is a successor to both [793]*793UTStarcom and Audiovox. HTC also asserts that PCD has continuously signed new agreements with HTC, acknowledging both the continuing validity as well as the parties’ ongoing rights and obligations under the supplier agreement. They claim that the arbitrator, and not the court, is the entity that must determine issues of contractual interpretation which surround the issue of whether the supplier agreement has expired. Based upon the acts of PCD, in any case, respondents set forth that petitioner is estopped from denying the arbitration provision of the agreement from which it continued to derive direct benefits and that the language of the various agreements demonstrate that the supplier agreement has not terminated.

Parties’ Various Agreements

To the extent relevant to the legal issues set forth above, the court sets down certain provisions contained in agreements since 2003. They are annexed to the affidavit of Stephanie Bariault, the vice-president of operations for HTC America Inc.

On July 2, 2003, HTC (located in Taiwan) and Audiovox Communications Corp. (located in Hauppauge, New York) entered into a supplier agreement whereby HTC manufactured and sold to Audiovox certain digital devices for resale in North America. The supplier agreement contained a two-year term and provided a process for termination for cause by either party. It also provided, at paragraphs 8 and 9, a procedure for rejection of defective items which included a requirement for HTC to bear responsibility for costs and expenses to correct the same upon what is defined as “Epidemic Failure.” With regard to disputes, the supplier agreement (exhibit A to Bariault aff) states (at para 19):

“Any controversy or claim arising out of or relating to this agreement, or the breach thereof, which does not involve claims by or against third parties, shall be settled by arbitration in the City of New York in accordance with the Rules of the American Arbitration Association, and judgment upon the award rendered by the Arbitrator(s) may be entered in any court having jurisdiction thereof. This Agreement shall be governed by and construed with the laws of the State of New York, without regard to its conflict of law rules.”

On October 29, 2004, Audiovox sold its wireless business and assets to UTStarcom Personal Communications LLC (UTStarcom). [794]*794UTStarcom. signed an amendment to the supplier agreement with HTC (exhibit B to Bariault aff) setting forth that “ [effective November 1, 2004, the transaction has closed. Upon the closing, UTStarcom has legally undertaken to assume all obligations under ACC’s Agreement . . . with HTC dated July 2, 2003.”

HTC agreed as of such date to the transfer of the agreement from Audiovox to UTStarcom.

On August 31, 2006, UTStarcom and HTC executed addendum No. 1 to the supplier agreement by and between UTStarcom and HTC. The addendum to the supplier agreement (exhibit C to Bariault aff) states that the July 2, 2003 agreement was assumed by UTStarcom and its subsidiary UTStarcom Personal Communications LLC and sets forth that

“3. HTC and UTPC agree that the remaining terms of the Supplier Agreement shall be reinstated continuously and extended beyond the expiration date. Except as set forth herein, all the terms of the Agreement shall remain in full force and effect.
“4. . . . The Addendum will continue for the same term as the Supplier Agreement, unless terminated by either party upon thirty days written notice at which time HTC will be responsible for all past due amounts under this Addendum.”

Thereafter, UTStarcom Personal Communications LLC (referred to as the Company) was merged into Personal Communications Devices Holdings LLC (the petitioner in this action, referred to as MergerCo). On June 30, 2008, under an agreement termed “MERGER AGREEMENT” (annexed as exhibit A to the aff of Craig Parietti, vice-president of finance for HTC America Inc.) it was agreed that “(a) the Company shall be merged with and into MergerCo and the separate corporate existence of the Company shall thereupon cease, (b) MergerCo shall be the surviving entity in the Merger.”

The merger agreement was stated to be construed in accordance with the laws of the State of New York.

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Cite This Page — Counsel Stack

Bluebook (online)
40 Misc. 3d 790, Counsel Stack Legal Research, https://law.counselstack.com/opinion/personal-communications-devices-llc-v-htc-america-inc-nysupct-2013.