Variblend Dual Dispensing Sys., LLC v. Seidel GMBH & Co.

• Citation: 970 F.Supp.2d 157
• Decision Date: 27 August 2013
• Docket Number: No. 13 Civ. 2597(PAE).,13 Civ. 2597(PAE).
• Parties: VARIBLEND DUAL DISPENSING SYSTEMS, LLC, Plaintiff, v. SEIDEL GMBH & CO., KG, Defendant.
• Court: U.S. District Court — Southern District of New York

970 F.Supp.2d 157

VARIBLEND DUAL DISPENSING SYSTEMS, LLC, Plaintiff,

v.SEIDEL GMBH & CO., KG, Defendant.

No. 13 Civ. 2597(PAE).

United States District Court,

S.D. New York.

Aug. 27, 2013.

Kim J. Landsman, Michael McGee Munoz, Golenbock Eiseman Assor Bell & Peskoe LLP, New York, NY, for Plaintiff.

Andrew W. Goldwater, Friedman, Kaplan, Seiler & Adelman, LLP, New York, NY, for Defendant.

OPINION & ORDER

PAUL A. ENGELMAYER, District Judge:

Plaintiff Variblend Dual Dispensing Systems, LLC (“Variblend”) sues defendant Seidel GmbH & Co. KG (“Seidel”) for alleged tortious conduct regarding proprietary trade secrets previously licensed to Seidel by Innopump, Inc., d/b/a Versadial (“Versadial”), a non-party to this action. Variblend alleges that it is the assignee of Versadial's rights under its agreement with Seidel. Seidel moves to dismiss this action and to compel arbitration in Geneva, Switzerland, in accordance with the arbitration provision contained in the agreement between Versadial and Seidel. For the following reasons, Seidel's motion to compel arbitration, under the terms of the agreement between Versadial and Seidel, is granted; and this action is stayed pending the outcome of that arbitration.

I. BackgroundA. Facts¹

1. The Parties

Versadial is a Nevada corporation with its principal place of business in New York, New York. Stipulation ¶ 1. Seidel is a German company with its principal place of business in Marburg, Germany. Id. Variblend is a Delaware limited liability company with its principal place of business in Montvale, New Jersey. Id.

2. The Agreement

On September 20, 2006, Versadial entered into a Manufacturing Agreement (the “Agreement”) (Stipulation Ex. 1) with Seidel. Id. ¶ 2. On October 2, 2008, the two parties entered into Amendment No. 1 to the Manufacturing Agreement (“Amendment No. 1”) (Stipulation Ex. 2).

The Agreement provided for Seidel to manufacture for Versadial components (called “sub-assemblies”) of an invention to which Versadial possessed the exclusive rights. See Agreement; Compl. ¶ 13. That invention was embodied in U.S. Patent No. 6,464,107 B 1, which had been issued on October 15, 2002. Compl. ¶ 11. It covers a dual chamber dispensing device that custom-blends two fluids by rotating the device's dispenser head. Id. ¶ 12. Such blending allows a user to select various formula strengths for the substance contained within the device. According to Variblend, it enables the production of an “innovative lip gloss dispenser that allows the user to control the color or shade of the gloss by varying the proportions of two shades or colors pumped from two chambers.” Id. ¶ 1.

The Agreement stated that Seidel would manufacture for Versadial sub-assemblies “substantially in accordance with the Specifications as provided by [Versadial].” Agreement § 2.1. It also prohibited Seidel from manufacturing any variable dual chamber dispensary device competitive with the one contemplated by the Agreement for any other person or entity, during the term of the Agreement and for two years thereafter. Id. In turn, Versadial was to purchase its requirements for these parts from Seidel, and would provide to Seidel specifications, assembly line equipment, and molds to be used by Seidel in production. Id. § 2.2. Versadial would also license its intellectual property rights to Seidel. Id.

3. Performance and Termination

During the first half of 2009, Seidel manufactured lipstick dispenser sub-assemblies pursuant to the Manufacturing Agreement. Stipulation ¶ 4. It sold these sub-assemblies to Versadial, which in turn sold them to Avon Products, Inc. (“Avon”). Id. For a short period of time in 2009, Avon, a major cosmetics company, sold the product as SpectraColor lipstick. Compl. ¶ 1.

Disputes subsequently arose between Versadial and Seidel. Stipulation ¶ 4. Each party sent to the other a notice of termination of the Agreement, asserting a different basis for termination and a different termination date. Versadial's notice was dated April 28, 2009, see id. Ex. 4, and Seidel's was dated December 10, 2009, see id. Ex. 3.

4. Assignment to Variblend

On August 10, 2012, Versadial entered into an Assignment and Release Agreement with Variblend. See id. Ex. 5. That document granted Variblend “all of [Versadial]'s right, title and interest in and to [Versadial]'s assets, properties and rights, whether tangible or intangible, real or personal, and specifically including ... the rights held by [Versadial] under that certain Manufacturing Agreement [with] Seidel.” Id. at 1. It did not, however, assign to Variblend any of Versadial's “obligations, duties or liabilities” under the Agreement. Id. § 1.2.

On August 31, 2012, Variblend sent a letter via email to Seidel, attaching a copy of the Assignment and Release Agreement between it and Versadial and stating that Variblend would seek to “aggressively pursu[e] ownership and possession of all assets held by [Seidel] that were paid for by Versadial.” See Stipulation Ex. 6. On November 16, 2012, Variblend's counsel in Germany sent another letter, again requesting equipment in Seidel's possession—specifically, an assembly table and production molds—and requesting that Seidel refrain from any and all further use of equipment and intellectual property belonging to Variblend or Versadial. Id. Ex. 8. In that letter, Variblend also asserted a claim for compensatory damages and indemnification with respect to third-party claims. Id. at 7.

On December 4, 2012, counsel for Seidel responded via letter. See Stipulation Ex. 10. Seidel objected to Variblend's request on various grounds, including that Variblendhad not “explain[ed] the grounds for [its] property claim” and that, because Seidel had not approved the assignment to Variblend, as contemplated by the Agreement, Variblend “c[ould] not be owners of any rights stemming from the Manufacturing Agreement.” Id. at 2.

Variblend asserts that it is “in the process of manufacturing and intends to introduce a 20 mm. lipstick dispenser similar to the Spectracolor lipstick previously sold by Avon.” Compl. ¶ 21. Variblend believes that Seidel “currently is using the molds and other equipment ... built with the trade secrets disclosed to it by [Versadial], and information derived and developed from those trade secrets, to manufacture its own lipstick product, which it intends or has begun to sell. That product will compete with the one that Variblend will soon introduce.” Id. ¶ 22.

B. Procedural History

On April 19, 2013, Variblend filed the Complaint. Dkt. 1. The Complaint alleges misappropriation of trade secrets and unfair competition. See Compl. passim. On June 6, 2013, Seidel filed a motion to compel arbitration of all claims asserted in the Complaint and to dismiss the action or, in the alternative, to stay it pending the outcome of arbitration, see Dkt. 4, and an accompanying memorandum of law in support of that motion, see Dkt. 5 (“Seidel Br.”). On June 12, 2013, the Court held an initial conference with the parties. See Dkt. 7. On July 2, 2013, Variblend filed its opposition to Seidel's motion. Dkt. 9 (“Variblend Br.”). On July 17, 2013, Seidel filed its reply. Dkt. 11 (“Seidel Reply Br.”). On July 29, 2013, the Court received a letter from Variblend, asking the Court's leave to file a sur-reply in response to what it characterized as new arguments raised in Seidel's reply brief. Dkt. 12. Seidel opposed that request. See Dkt. 13. On July 30, 2013, the Court granted Variblend permission to file a sur-reply not to exceed five pages in length. See Dkt. 12. On August 5, 2013, Variblend filed its sur-reply. Dkt. 14 (“Variblend Sur–Reply”).

II. Applicable Legal StandardA. Relevant Legal Principles Under the Federal Arbitration Act

The Federal Arbitration Act (“FAA”) creates a body of federal substantive law establishing and governing the duty to honor agreements to arbitrate disputes. Mitsubishi Motors Corp. v. Soler Chrysler–Plymouth, Inc., 473 U.S. 614, 625, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985) (quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983)). The FAA was enacted to reverse “centuries of judicial hostility to arbitration agreements” and “to place arbitration agreements ‘upon the same footing as other contracts.’ ” Scherk v. Alberto–Culver Co., 417 U.S. 506, 510–11, 94 S.Ct. 2449, 41 L.Ed.2d 270 (1974) (citation omitted).

The Act accordingly provides that an arbitration agreement “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. The Act is based on Congress's powers to regulate interstate commerce and admiralty. It applies to “any maritime transaction or a contract evidencing a transaction involving commerce.” Id.; see Southland Corp. v. Keating, 465 U.S. 1, 10, 104 S.Ct. 852, 79 L.Ed.2d 1 (1984); Prima Paint Corp. v. Flood & Conklin Mfg. Corp., 388 U.S. 395, 405, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967).

Notwithstanding the strong “national policy favoring arbitration” evinced by Congress's enactment of the FAA, see Southland, 465 U.S. at 10, 104 S.Ct. 852,“arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit.” AT & T Techs. v. Commc'ns Workers of Am., 475 U.S. 643, 648, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986) (citations omitted). Therefore, the FAA's presumption of arbitrability does not apply to the threshold issue of whether the parties entered into a binding agreement to arbitrate at all. See Applied Energetics, Inc. v. NewOak Capital Mkts., LLC, 645 F.3d 522, 526 (2d Cir.2011) (“[W]hile doubts concerning the scope of an arbitration clause should be resolved in favor of arbitration, the presumption does not apply to disputes concerning whether an agreement to arbitrate has been made.”); Abram Landau Real Estate v. Bevona, 123 F.3d 69, 72 (2d Cir.1997). As a general matter, “[w]...