United States District Court, Western District of Pennsylvania
MEMORANDUM OPINION ON DEFENDANTS’ MOTION TO COMPEL ARBITRATION AND RULE 11(B) MOTION FOR SANCTIONS (DOC. NOS. 12 AND 13)
ARTHUR J. SCHWAB UNITED STATES DISTRICT JUDGE
This is a breach of contract action with related state law claims in which the primary basis of federal jurisdiction is diversity of citizenship. Plaintiffs, Ted Dionisio and Meylin Dionisio, are inventors of pet related products that they sought to have manufactured and brought to market with the assistance of Defendant Davison Design and Development, Inc. (Davison Design). Davison Design and Plaintiffs entered into several contracts whereby Davison Design agreed to provide design, development, promotion, licensing and patent information and services for inventor Plaintiffs. This Court has had two (2) prior opportunities to review the applicable contracts between Davison Design and its customers, as two (2) other lawsuits have been commenced before this Court by former customers of Davison Design, and this Court has twice decided the issue of whether an arbitration clause compelled dismissal of those suits - - both times finding that arbitration was required under the terms of the parties agreements. Wee v. Davison Design & Development, Inc., et al., 13-cv-01678 (Wee) and Sabina v. Davison Design & Development, et al., 14-cv-00160 (Sabina). This Court, in compelling arbitration, found by Memorandum Opinion in Sabina that the language in the invention related contract between Plaintiffs and Davison Design, which contains exactly the same language as in the present case, was “quite broad” and applied to the same causes of action raised by Plaintiffs in this case. In this case, the Court finds the same - - that Plaintiffs claims against Davison Design (and its owner George Davison III) are subject to arbitration. The only remaining conspiracy claim against Maze Innovations, a non-signatory to the contracts containing the arbitration clauses, will be stayed pending arbitration.
II. Factual Background
According to the Complaint, Plaintiffs are inventors of “three separate pet related products that they desired to have manufactured and brought to market.” Doc. No. 1 at ¶ 11. Plaintiffs entered into two primary contracts with Davison Design for each of their invention ideas – a Pre-Development and Representation Agreement and a New Product Sample Agreement. Attached to Complaint at Doc. Nos. 1-1 through 1-3. Critically, section III(C) of the Pre-Development and Representation Agreement, which was signed by each of the Plaintiffs’ product ideas, states:
C. Disputes; Arbitration
For any dispute, the parties agree to seek to resolve the dispute through good faith negotiation. For any dispute not resolved through good faith negotiation, the parties agree that all disputes shall be resolved through arbitration before the American Arbitration Association (“AAA”) in Pittsburgh, Pennsylvania using the Commercial Arbitration Rules in effect on the date that the claim is submitted to AAA. Client agrees that any claim must be brought in an individual capacity, and not as a plaintiff or class member in any purported class or representative proceeding.
Additionally, Section 6(A) of the New Product Sample Agreement, which was signed by each Plaintiff, contains a virtually identical provision:
6. CHOICE OF LAW; ARBITRATION; CURE
A. This Agreement shall be governed by the law of the Commonwealth of Pennsylvania and is deemed to be executed, entered into and performed in Pittsburgh, Pennsylvania. For any dispute, the parties agree to seek to resolve the dispute through good faith negotiation. For any dispute not resolved through good faith negotiation, the parties agree that all disputes shall be resolved through arbitration before the American Arbitration Association (“AAA”) in Pittsburgh, Pennsylvania using the Commercial Arbitration Rules in effect on the date that the claim is submitted to the AAA. Client agrees that any claim must be brought in an individual capacity, and not as a plaintiff or class member in any purported class or representative proceeding.
In total, Plaintiffs paid in excess of $45, 000 to Davison Design for two separate contracts for each of their three products. After Davison Design allegedly failed to fulfill its obligations under the contracts, Plaintiffs filed the within lawsuit against Davison Design, George Davison, III, and Maze Innovations Inc. d/b/a Hug Pet Products (“Maze”). Prior to signing the NPSA, Maze was allegedly identified as the “target” corporation to which two of Plaintiff products would be presented. Doc. No. 1-4. According to Plaintiffs, Davison Design did not disclose any type of relationship between itself and Maze.
III. Applicable Standard of Review/Case Law
Defendants move to compel arbitration and for sanctions. Recently, in Guidotti v. Legal Helpers Debt Resolution, LLC, 716 F.3d 764 (3d Cir. 2013), the United States Court of Appeals for the Third Circuit, citing Somerset Consulting, resolved the “split pronouncements on the standard for deciding a motion to compel arbitration”:
. . . [w]here [as here] the affirmative defense of arbitrability of claims is apparent on the fact of a complaint (or. . . documents relied upon in the complaint), the FAA would favor resolving a motion to compel arbitration under a motion to dismiss standard without the inherent delay of discovery. That approach appropriately fosters the FAA’s interest in speedy dispute resolution. In those circumstances, ‘the question to be answered . . . becomes whether the assertion of the complaint, give the ...