Opinion
Cause No. 3:02-CV-1444-K.
August 9, 2005
ORDER
Came on for Consideration, Century Steps, Inc.'s ("Century") Motion for Preliminary Injunction. The Court finds that the relief requested is warranted because Century has satisfied the requirements necessary to obtain a temporary injunction therefore, Century's Motion is GRANTED.
I. Background
The Court has extensively recounted the facts of this case in its previous orders, and so will only recite the relevant facts here.
RFR filed its first suit against Century in 1998 ("the original case.") The parties settled in 2000 and under the parties' Settlement Agreement, Century agreed to pay RFR a settlement amount and purchase a certain amount of product from RFR.
In 2002, RFR sued Rex-Hide ("the present case,") Century's main supplier, for patent infringement in this Court. Rex-Hide then brought a third party complaint against Century for indemnity. Century filed a cross-claim against RFR for indemnity under the parties' Settlement Agreement and RFR filed a declaratory judgment counterclaim against Century seeking a declaration that no indemnity was owed. On January 12, 2004, the Court granted Century's motion for summary judgment that RFR was required to indemnify and defend Century from Rex-Hide's claims against Century. The Court then held a bench trial on the issue of Century's duty to indemnify Rex-Hide against RFR's patent infringement claims and the Court held that Century must indemnify Rex-Hide against RFR's claims. The Court further held that the combination of these two rulings created circular indemnity that extinguished RFR's patent claims against Rex-Hide.
When Rex-Hide sued Century for indemnity against RFR's claims, Century requested that RFR defend Century pursuant to the parties' Settlement Agreement. Century withheld its remaining settlement payments from RFR as well as its payment for product purchased from RFR when RFR declined to defend and indemnify Century. RFR then filed an arbitration demand ("the arbitration proceeding") against Century under the parties' Settlement Agreement seeking relief for 1) payment of the final settlement amounts and 2) payment for the product.
After its arbitration demand, RFR filed a separate patent-infringement suit ("the new lawsuit") against Century in the Northern District of Texas that complained of Century's nonpayment for flangeway filler that Century ordered from RFR.
Finally, RFR filed a petition to show cause ("the contempt motion") in the original case for violation of the permanent injunction entered in that suit in 2000. RFR's contempt motion complained of Century's nonpayment for flangeway filler that Century ordered from RFR.
II. Injunctive Relief
To obtain a preliminary injunction against arbitration, Century must show 1) a substantial likelihood that Century will prevail on the merits, 2) a substantial threat that Century will suffer irreparable injury if the injunction is not granted, 3) that the threatened injury to Century outweighs the threatened harm the injunction may do to RFR, and 4) that granting the preliminary injunction will not disserve the public interest. Harris County v. Carmax Auto Superstores, Inc., 177 F.3d 306, 312 (5th Cir. 1999); Miss. Power Light Co. v. United Gas Pipe Line, 760 F.2d 618, 621 (5th Cir. 1985). The decision to grant or deny a preliminary injunction is left to the sound discretion of the district court. A preliminary injunction is an extraordinary remedy which should only be granted if the movant has carried his burden of persuasion on all of the four factors. Mississippi Power Light, 760 F.2d at 621. Applying the four factors, the Court has determined that Century is entitled to injunctive relief.
A. Likelihood of Success on the Merits
Century is likely to be successful on its claim that RFR has waived its right to arbitration. A party waives its right to arbitrate if it substantially invokes the judicial process to the detriment or prejudice of the other party. See Republic Ins. Co. v. PAICO Receivables, LLC, 383 F.3d 341, 344 (5th Cir. 2004); Miller Brewing Co. v. Fort Worth Distributing Company, 781 F.2d 494, 497 (5th Cir. 1986). To invoke the judicial process "[t]he party must, at the very least, engage in some overt act in court that evinces a desire to resolve the arbitrable dispute through litigation rather than arbitration." Republic, 383 F.3d at 344 (5th Cir. 2004) (quoting Subway Equip. Leasing Corp. v. Forte, 169 F.3d 324, 329 (5th Cir. 1999)). In this case, RFR filed a counterclaim against Century that the Settlement Agreement did not require RFR to indemnify Century in the present lawsuit and RFR filed a separate new lawsuit and a motion for contempt, both seeking relief from the same wrong alleged in the arbitration. As such, RFR has invoked the judicial process to Century's detriment.
B. Irreparable Injury
A party seeking a preliminary injunction must also show that it will be prejudiced or will suffer irreparable harm if the injunction does not issue. Harris County, 177 F.3d at 312. The arbitration proceeding depends in large part upon the issue of whether the Settlement Agreement requires RFR to indemnify and defend Century. Century is prejudiced by having to pay to litigate these issues twice — once in this Court, and again in arbitration. Further, RFR's attempt to litigate the same issues in federal court and before the arbitrator prejudices Century by subjecting Century to a risk of inconsistent adjudications. For these reasons, Century will be prejudiced if the arbitration is allowed to proceed.
C. Balance of Interests and Public Interest
The balance of the parties' interests and the public interest favors enjoining the arbitration because RFR can pursue all of its claims, including those in the arbitration demand, in this Court without the threat of inconsistent adjudications and Century and RFR will not have to duplicate their efforts. In sum, enjoining the arbitration proceeding will allow all of the claims and issues arising between RFR and Century involving the parties' Settlement Agreement and RFR's patents to be heard and decided by one tribunal.
III. Conclusion
RFR substantially invoked the judicial process to Century's detriment. Further, Century has satisfied the requirements necessary to obtain a temporary injunction. Specifically, Century has shown a substantial likelihood that Century will prevail on the merits, a substantial threat that Century will suffer irreparable injury if the injunction is not granted, that the threatened injury to Century outweighs the threatened harm the injunction may do to RFR, and that granting the preliminary injunction will not disserve the public interest. Therefore, the Court hereby enjoins RFR from pursuing its arbitration claim against Century and further orders RFR to file any and all future actions relating to the RFR patents, or the RFR-Century Settlement Agreement in the Northern District of Texas in Judge Kinkeade's Court.
SO ORDERED.