Big Squid, Inc. v. Domo, Inc.
| Decision Date | 05 August 2019 |
| Docket Number | Case No. 2:19-cv-193 |
| Parties | BIG SQUID, INC., Plaintiff and Counterclaim Defendant, v. DOMO, INC., Defendant and Counterclaimant. |
| Court | U.S. District Court — District of Utah |
This case stems from a business relationship between two software companies. Beginning in 2015, Plaintiff Big Squid, Inc. and Defendant Domo, Inc. entered into contracts to sell software and software implementation services. The parties' relationship soured, and Big Squid filed suit in the Third District Court for the State of Utah.1 Domo counterclaimed, and removed to this court.2 The court now takes up Domo's Motion to Stay Big Squid's DAPPA-Related Claims and Compel Arbitration,3 Domo's Motion to Dismiss,4 and Big Squid's Motion to Dismiss.5 For the reasons stated, Domo's Motion to Compel Arbitration is DENIED, Domo's Motion to Dismiss is GRANTED IN PART, and Big Squid's Motion to Dismiss is DENIED.
Domo and Big Squid are software companies with symbiotic capabilities. Domo sells software that often requires professional implementation services, which Big Squid offers. Beginning in 2015, Domo and Big Squid worked together productively for more than three years.6 During that time, three contracts governed the parties' relationship: the Master Service Provider Agreement (MSPA), the Domo App Publisher Program Agreement (DAPPA), and the Master Resale and Referral Agreement (MRRA).7
In April of 2015, Domo and Big Squid entered into the MSPA.8 Under the MSPA, Big Squid offered professional software implementation services to Domo's existing customers.9 Among other rights and obligations, the terms of the MSPA govern compensation;10 auditing rights;11 restrictions on competition between the parties;12 the governing law;13 and the use and exchange of confidential information,14 intellectual property,15 and "Deliverables."16
In early 2016, the parties expanded their contractual relationship by executing the DAPPA.17 Under the DAPPA, Domo gave Big Squid access to the Domo Appstore, which Big Squid could use to sell software to Domo's network of clients.18 Like the MSPA, the terms of the DAPPA govern compensation;19 restrictions on competition between the parties;20 the governing law;21 and the use and exchange of confidential information and intellectual property.22 The DAPPA also contains an arbitration provision. The arbitration provision provides that "any action arising out of or in connection with this DAPPA or the breach, termination, enforcement, interpretation or validity thereof, will be determined by binding arbitration in Salt Lake County, Utah, U.S.A. by one arbitrator."23
In July of 2016, the parties expanded their relationship once again by executing another agreement, the MRRA.24 The MRRA augmented the scope of professional services Big Squid could offer under the MSPA by authorizing Big Squid to "resell the Domo Service and related Domo Professional Services and offerings to [clients recruited by Big Squid], refer potential [clients] to Domo, or provide Professional Services to Domo Subscribers as a Domo subcontractor."25 Like the MSPA and portions of the DAPPA, the MRRA governscompensation;26 auditing rights;27 the governing law;28 and the use and exchange of confidential information,29 intellectual property,30 and "Deliverables."31 The MRRA omits the arbitration provision earlier negotiated and included in the DAPPA.32
After nearly three years of productive collaboration, the parties' relationship began to suffer. On January 30, 2019, Big Squid filed suit in the Third District Court for the State of Utah.33 Big Squid brought five state law claims against Domo: (1) Breach of Contract, (2) Breach of the Implied Covenant of Good Faith and Fair Dealing, (3) Tortious Interference with Economic Relations, (4) Unfair Competition, and (5) Declaratory Judgment.34 Domo timely removed, and the case was assigned to Judge Bruce S. Jenkins.35 Big Squid subsequently moved to remand the suit to state court.36 Concluding Big Squid's Complaint asserted "claims sounding on contract, not a claim of copyright infringement or any other cause of action presenting a federal question," Judge Jenkins remanded the suit to Utah state court on March 18, 2019.37
Later that day, Domo filed its Answer and Counterclaim in state court.38 Domo's Counterclaim asserts twelve causes of action, including: Copyright Infringement, FederalMisappropriation of Trade Secrets, State Misappropriation of Trade Secrets, Conversion, Intentional Interference with Economic Relations, and Injunctive Relief.39 Domo also filed a "Notice of Removal."40 Big Squid did not move to remand, and because Domo asserts a claim for copyright infringement, this court is satisfied that removal is proper under 28 U.S.C. § 1454(a).41
Domo now moves to stay Big Squid's DAPPA-related claims and compel arbitration.42 Domo also moves to dismiss Big Squid's claims.43 Big Squid moves to dismiss all but Domo's contract claims.44 Before the court heard oral argument on the parties' Motions, it invited the parties to submit additional briefing on "the meaning and scope of the word 'action' in the [DAPPA's] arbitration provision."45 Both parties submitted supplemental briefing,46 and the court received oral argument on July 11, 2019.47 The court now takes up Domo's Motion to Compel Arbitration before turning to the parties' Motions to Dismiss.
Under the Federal Arbitration Act, contractual agreements to arbitrate disputes "shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract."48 The FAA permits a party to an arbitration agreement to "apply to a federal court for a stay" while arbitration proceeds,49 and it also permits a party to "petition a federal court for an order directing" arbitration to proceed consistent with the terms of the arbitration agreement.50
Because arbitration "is strictly a matter of consent[,] [it] is a way to resolve those disputes—but only those disputes—that the parties have agreed to submit to arbitration."51 "[W]hether parties have agreed to submit a particular dispute to arbitration is typically an issue for judicial determination."52 To satisfy itself that parties have agreed to arbitrate particular disputes, "the court must resolve any issue that calls into question the formation or applicability of the specific arbitration clause that a party seeks to have the court enforce."53 "Where a party contests either or both matters, the court must resolve the disagreement."54
A party can contest the formation of the arbitration agreement by challenging "the validity of the agreement to arbitrate."55 Alternatively, a party can contest the applicability of the arbitration agreement to particular disputes by challenging the scope of the arbitration provision.56 When "parties concede that they have agreed to arbitrate some matters pursuant to an arbitration clause," but challenge the scope of the arbitration clause, they must overcome a presumption of arbitrability.57 Under the FAA, "any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration."58
"To determine whether a particular dispute falls within the scope of an agreement's arbitration clause, a court should undertake a three-part inquiry."59 First, the court must determine whether the arbitration clause is broad or narrow.60 If the clause is narrow, "the court must determine whether the dispute is over an issue that is on its face within the purview of the clause, or over a collateral issue that is somehow connected to the main agreement that contains the arbitration clause."61 If the clause is broad, the presumption of arbitrability commands arbitration of collateral matters when the claim at issue implicates "contract construction or the parties' rights and obligations under it."62 "This presumption may be overcome only if 'it maybe said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute.'"63
Domo moves to compel arbitration on Big Squid's DAPPA-related claims.64 Domo argues the court must compel arbitration on portions of every Big Squid claim because all of Big Squid's claims "specifically allege facts that arise under the DAPPA."65 In opposition, Big Squid contends it is too early for the court to "meaningfully disentangle" its DAPPA-related claims from others.66 Big Squid also argues that splitting its claims between this court and arbitration would undermine the purpose of arbitration.67
The parties do not dispute the formation or validity of the DAPPA.68 Nor do they dispute that the DAPPA "will be interpreted, construed, and enforced in all respects in accordance with the local laws of the State of Utah."69 Instead, they dispute the scope of the DAPPA's arbitration provision, which provides:
Except for the right of either party to apply to a court of competent jurisdiction for a temporary restraining order, a preliminary injunction, or other equitable relief to preserve the status quo or prevent irreparable harm, any action arising out of or in connection with this DAPPA or the breach, termination, enforcement, interpretation or validity thereof, will bedetermined by binding arbitration in Salt Lake County, Utah, U.S.A. by one arbitrator.70
Nothing in this arbitration provision provides "clear and unmistakable evidence" the parties intended to arbitrate the applicability of the arbitration provision.71 Accordingly, this court will determine the applicability of the DAPPA's arbitration provision.
First, this arbitration provision is broad in scope. The provision covers "any action arising out of or in connection with th[e] DAPPA."72 Courts consistently conclude this language confers a broad scope of arbitration.7...
To continue reading
Request your trial