Opinion
CASE NO. 1:19-cv-24235-JB
2021-03-02
The TAYLOR GROUP, INC., a Mississippi corporation, Taylor Machine Works, Inc., a Mississippi corporation, Sudden Service, Inc., a Mississippi corporation, Plaintiffs, v. INDUSTRIAL DISTRIBUTORS INTERNATIONAL CO., a Florida corporation, Defendant.
Jesse L. Beringer, Pro Hac Vice, Michael J. Lockerby, Pro Hac Vice, Foley & Lardner LLP, Washington, DC, Laura Ganoza, Mary Leslie Smith, Foley & Lardner LLP, Miami, FL, for Plaintiffs. Charles Christian Kline, James Anthony Gale, Samuel Abraham Lewis, Cozen O'Connor, Miami, FL, for Defendant.
Jesse L. Beringer, Pro Hac Vice, Michael J. Lockerby, Pro Hac Vice, Foley & Lardner LLP, Washington, DC, Laura Ganoza, Mary Leslie Smith, Foley & Lardner LLP, Miami, FL, for Plaintiffs.
Charles Christian Kline, James Anthony Gale, Samuel Abraham Lewis, Cozen O'Connor, Miami, FL, for Defendant.
ORDER GRANTING DEFENDANT'S MOTION TO STAY ACTION PENDING APPEAL
The parties consented to proceed before the undersigned on May 18, 2020. ECF Nos. [65], [66], and [67]. Thereafter, the cause was referred entirely to the undersigned to "take all necessary and proper action as required by law, including, if necessary, a jury or non-jury trial and entry of final judgment." ECF No. [68].
JACQUELINE BECERRA, United State Magistrate Judge
Plaintiffs, The Taylor Group, Inc. ("Taylor Group"), Taylor Machine Works, Inc. ("TMW"), and Sudden Service, Inc. ("SSI") (collectively, "Plaintiffs," the "Taylor Plaintiffs" or "Taylor"), filed their Complaint against Defendant Industrial Distributors International Co. ("IDICO" or "Defendant") alleging acts of infringement and unfair competition under the Trademark Act of 1946 (the "Lanham Act"), 15 U.S.C. § 1051 et seq. ECF No. [1] ¶¶ 2, 5–8. Plaintiffs also filed a Motion and Request for Preliminary Injunction against Defendant to prevent Defendant from making unauthorized use of Plaintiffs’ federally registered marks and from holding itself out as an authorized dealer of genuine Plaintiffs’ equipment, parts, and services. ECF Nos. [4] at 2; [23]. On November 27, 2019, Defendant filed a Motion to Compel Arbitration and Stay the Action and its Response in Opposition to the Motion for Preliminary Injunction. ECF Nos. [25], [28]. On December 10, 2020, this Court filed and Order (the "Order") denying Defendant's Motion to Compel Arbitration and Stay the Action and granted Plaintiffs’ Motion for a Hearing on the Preliminary Injunction. ECF No. [90]. The hearing on the preliminary injunction was scheduled for February 24, 2021. ECF No. [92]. On December 21, 2020, Defendant filed a Notice of Appeal as to the Court's Order. ECF No. [93]. Defendants then filed the instant Motion to Stay Litigation Pending Appeal of the Order (the "Motion to Stay"). ECF No. [95]. Plaintiffs filed their Response in Opposition to the Motion to Stay, ECF No. [97], and Defendant filed a Reply, ECF No. [98].
On February 17, 2021, Defendant filed a Notice of Conflict and Motion for Continuance of the hearing on February 24, 2021 regarding the Motion for Preliminary Injunction. ECF No. [100]. The reason for the Notice of Conflict and Motion for Continuance was that the Eleventh Circuit Court of Appeals, per Federal Rules of Appellate Procedure 33 and Eleventh Circuit Rule 33-1 ordered the parties to participate in a mediation and "there [did] not appear to be enough time to do both" the hearing and the mediation. Id. at 1. Plaintiffs filed their Response in Opposition to IDICO's Motion for Continuance requesting that the it be denied arguing that there was no conflict because the hearing was scheduled for 10:00 AM and the mediation was scheduled for 2:30 PM and stating that they had requested that the mediation be continued instead. ECF No. [101] at 1. The undersigned granted Defendant's Notice of Conflict and Motion for Continuance and set the Motion to Stay for Argument on February 25, 2021. ECF No. [102].
I. BACKGROUND
This order incorporates the facts as laid out in this Court's December 10, 2020 Order Denying Defendant's Motion to Compel Arbitration and Stay the Action and granting Plaintiffs’ Motion for a Hearing on the Preliminary Injunction. ECF No. [90].
II. LEGAL STANDARD
Pursuant to the Federal Arbitration Act, "[a]n appeal may be taken from—(1) an order—(A) refusing a stay of any action under section 3 of this title 9 U.S.C.A. § 16(a)(1)(A). "By its clear and unambiguous terms, § 16(a)(1)(A) entitles any litigant asking for a § 3 stay to an immediate appeal from that motion's denial-regardless of whether the litigant is in fact eligible for a stay." Arthur Andersen LLP v. Carlisle , 556 U.S. 624, 129 S.Ct. 1896, 173 L.Ed.2d 832 (2009). While the appeal is pending, a stay of the proceedings is required. See Baron v. Best Buy Co. , 79 F.Supp.2d 1350, 1353 (S.D. Fla. 1999) (citing Bradford–Scott Data Corp. v. Physician Computer Network, Inc. , 128 F.3d 504, 505–06 (7th Cir. 1997) ). However, in order to avoid dilatory conduct by a party, the district court will proceed with the litigation "if the appeal from the order refusing to compel arbitration is frivolous." Baron , 79 F.Supp.2d at 1354. "[A] claim is not frivolous if it is ‘colorable,’ and a claim is ‘colorable’ if ‘there is some possible validity’ to it." Id. (citing Richardson v. United States , 468 U.S. 317, 322, 104 S.Ct. 3081, 82 L.Ed.2d 242 (1984) ). The Eleventh Circuit has stated that an appeal is frivolous when it is "without arguable merit in either law or fact." Napier v. Preslicka , 314 F.3d 528, 531 (11th Cir. 2002).
III. ANALYSIS
Defendant argues that the Court should stay the litigation pending IDICO's appeal of the Order, ECF No. [90]. ECF No. [95]. Defendant cites to AT&T Tech., Inc. v. Commc'ns Workers of Am. , stating that "[a]n order to arbitrate the particular grievance should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute. Doubts should be resolved in favor of coverage." 475 U.S. 643, 650, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986) (quotation marks and citation omitted). Thus, Defendant states that it is not frivolous to assume that a panel of judges reviewing this case de novo could conclude that,
Taylor is bound to arbitrate its claims against IDICO under the theories (i) that Taylor assumed the IDICO Marketing Agreement when its affiliate acquired the assets of International, (ii) that International executed the IDICO Marketing Agreement as agent for Taylor, (iii) that Taylor is estopped to deny their obligation to arbitrate with IDICO, and (iv) that Taylor was a third party beneficiary of the IDICO Marketing Agreement who directly benefited from that contract.
ECF No. [95] at 4. In fact, a panel of the ICC Court determined that IDICO made a prima facie showing that TMW and SSI should proceed under arbitration pursuant to the IDICO Marketing Agreement. Id.
At the hearing on February 25, 2021, the parties informed the Court that this arbitration has been stayed pending the outcome of IDICO's appeal.
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Plaintiffs counter that the appeal is frivolous and used to further delay this Court on ruling on the Motion for Preliminary Injunction, ECF No. [4]. ECF No. [97]. Plaintiffs state that an appeal may be found frivolous "if it lacks colorable support or is contrary to recent controlling case law." Id. at 6 (citing In re Checking Account Overdraft Litig. , No. 1:09-CV-23067-JLK, 2009 WL 10670154, at *2 (S.D. Fla. Dec. 21, 2009) ). In contrast, appeals have been found not frivolous where there is a split of controlling authority. TGB Marine, LLC v. Midnight Express Power Boats, Inc. , No. 08-60940-CIV-COHN, 2008 WL 4649009, at *1 (S.D. Fla. Oct. 20, 2008). In this case, Plaintiffs argue that "IDICO has not cited any split in Eleventh Circuit authority," "has not even offered any controlling supporting authority for its arguments," and makes arguments to support its appeal which "are directly at odds with controlling case law." ECF No. [97] at 7.
While Plaintiffs make strong arguments, the Court cannot find that the appeal is frivolous. Defendants’ arguments center around this Court's interpretation of the language and interplay of three different agreements—the International Distribution Agreements between TMW and SSI and Taylor Machine Works International for certain overseas distribution rights; the IDICO Marketing Agreement between IDICO and International where IDICO was appointed as a marketing agent for Taylor in the Dominican Republic and later expanded to Colombia; and the Asset Purchase agreement where Taylor International, whose sole member is TMW, purchased back from International the rights provided in the International Distribution Agreements. See ECF Nos. [1] ¶¶ 3, 36, 40–45; [25] at 2; [25-1] at 25–35. Defendants argue that in interpreting these three agreements, the Eleventh Circuit could find that Plaintiffs were bound by the arbitration clause in the IDICO Marketing Agreement through theories of agency, estoppel, assumption, and third-party beneficiary. ECF No. [95] at 7–13. Regarding their theory of agency, Defendant argues, among other things that:
The interpretation of International's Marketing Agreement requires consideration of competing language. The anti-assignment clause says "the right extended by Taylor to sell Taylor products is not an asset of International, but belongs at all times to Taylor, subject to the terms of this agreement." Yet one of International's responsibilities under the same agreement is the "appointment of overseas dealers in the territory ceded." It would be perfectly reasonable for a panel of judges to conclude that if the right to sell Taylor products in International's territory remained at all times
with Taylor, International's responsibility to appoint dealers in International's territory was as an agent for Taylor who retained the right to sell Taylor products.
Id. at 7–8. Similarly, regarding the theory of estoppel, Defendants argue that a panel of judges could find that Plaintiffs "put International in a position where it could appoint dealers and therefore Taylor is estopped from denying the appointment and must arbitrate any claims that turn on the validity and effect of the appointment." Id. at 9. Although Defendants provided no controlling authorities to support their arguments, and the Court finds their arguments colorable. See Nat'l Auto Lenders, Inc. v. SysLOCATE, Inc. , No. 09-21765-CIV, 2010 WL 4867583, at *3 (S.D. Fla. Apr. 27, 2010) (the court held that although it had "determined that the elements needed to establish an apparent agency relationship were not present in this case," it nevertheless "agree[d] with Defendants that their claims are at least colorable" because "the appeal challenged the incapacity of Mr. Long to represent his company and [Plaintiff]’s ability to refuse to enter into Defendants’ end-users license agreements while some of its employees clicked and accepted those agreements to the company's benefit"); World Rentals & Sales, LLC v. Volvo Constr. Equip. Rents, Inc. , No. 06-60753-CIV, 2006 WL 8451165, at *2 (S.D. Fla. Dec. 20, 2006) (holding that "[a]n incorporation by reference argument, while somewhat of a stretch under all the facts of this case, possesses enough legal merit to make Plaintiffs’ appeal non-frivolous").
The Court provided the parties its ruling at the Hearing on the Motion, and as such, the Order only memorializes and cites the authorities on which the Court relies. As the Court advised, if the Eleventh Circuit affirms this Court's Order, the parties should be prepared to proceed on the Motion for Preliminary Injunction within two weeks of such decision.
IV. CONCLUSION
Based on the foregoing, it is hereby ORDERED AND ADJUDGED that Defendant's Motion to Stay Action Pending Appeal, ECF No. [95], be GRANTED.
DONE AND ORDERED in Chambers at Miami, Florida, this 2nd day of March, 2021.