Riley Mfg. Co., Inc. v. Anchor Glass Container Corp., 96-3299

• Decision Date: 11 September 1998
• Docket Number: No. 96-3299,96-3299
• Citation: 157 F.3d 775
• Parties: 98 CJ C.A.R. 4990 RILEY MANUFACTURING COMPANY, INC., Plaintiff-Counter-Defendant-Appellee, v. ANCHOR GLASS CONTAINER CORPORATION, Defendant-Counter-Claimant-Appellant, and Trend Plastics, Inc., Defendant-Counter-Claimant.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 775

157 F.3d 775

98 CJ C.A.R. 4990

RILEY MANUFACTURING COMPANY, INC. Plaintiff-Counter-Defendant-Appellee, v. ANCHOR GLASS CONTAINER CORPORATION Defendant-Counter-Claimant-Appellant and Trend Plastics, Inc., Defendant-Counter-Claimant.

No. 96-3299.

United States Court of Appeals Tenth Circuit.

Sept. 11, 1998.

Steven L. Brannock, (Rebecca H. Steele with him on the briefs), Holland & Knight, LLP, Tampa, Florida, for appellant.

James Robert McKown, (Gardiner B. Davis with him on the brief), Spencer Fane Britt & Browne, LLP, Kansas City, Missouri, for appellee.

Before PORFILIO and EBEL, Circuit Judges, and BRETT, Senior District Judge. ^*

EBEL, Circuit Judge.

This copyright and trade secret dispute between two former commercial partners, now competitors, requires us to examine the federal common law of arbitrability. Under that law, we disagree with the district court's conclusion that there was no valid and enforceable arbitration agreement between the parties. Instead, we find that at least a portion of the dispute in this case appears to be arbitrable. Therefore, we must reverse and remand.

Background

Since the early 1980s, Riley Manufacturing Company ("Riley"), based in Olathe, Kansas, has been in the business of making "sun tea" jars with copyrighted ornamental designs stenciled on the glass and plastic containers. Riley had a long-term relationship with Trend Plastics, Inc. ("Trend"), also based in Olathe, Kansas, to supply the plastic spigots and plastic lids that were made from injection molds that Riley designed and over which Riley asserted trade secret protection. In 1989, Riley began using Anchor Glass Container Corporation ("Anchor Glass"), based in Tampa, Florida, as its supplier of glass jars.

In 1991, facing difficulties in increasing its own distribution network, Riley went to Anchor Glass to work out a deal whereby Anchor Glass would distribute Riley's sun tea products through Anchor Glass' nationwide distribution network. In the contract memorializing this arrangement (the "Manufacturing Agreement"), Riley agreed to provide all of Anchor Glass' needs for sun tea jars, up to 3.75 million units per year, and Anchor Glass agreed to use "reasonable efforts" to market Riley's sun tea products. The agreement provided various specifications for the manufacturing and distribution relationship between Riley and Anchor Glass, but the three provisions that are most relevant in this dispute are the copyright-assignment, termination, and arbitration clauses.

The copyright provisions in the Manufacturing Agreement indicated that Riley already had assigned to Anchor Glass the copyrights for all of the ornamental designs that were then being used on the sun tea containers that Anchor Glass would be selling for Riley. Riley also agreed to assign to Anchor Glass the copyrights in any new ornamental designs it created during the life of the manufacturing relationship. However, in the event that Anchor Glass terminated the parties' distribution arrangement, Anchor Glass agreed to reassign to Riley any of the copyrights that Riley initially had transferred to Anchor Glass. Furthermore, although Anchor Glass would have the right to sell off its remaining inventory of Riley-manufactured sun tea jars when the contract expired, it would have no right to use or sell the Riley designs after the copyrights were reassigned to Riley.

Under the termination clause, the parties specified what continuing rights each would have when the three-year contract expired. Most importantly for the purposes of this case, Anchor Glass was given the right to manufacture sun tea jars with spigots that were "substantially identical" to Riley's spigots, but Anchor Glass would have no right to use Riley's injection molds for the creation of these "substantially identical" plastic spigots. This provision essentially allowed Anchor Glass to manufacture sun tea jars--although not with Riley's ornamental designs--as long as Anchor Glass went to the trouble of creating its own injection molds, a process that Riley claims is expensive and time-consuming. Furthermore, although the termination clause allowed Anchor Glass to manufacture "substantially identical" spigots, the contract is not explicit about possible infringements of Riley's trade dress in the overall appearance of the sun tea products.

Finally, under the arbitration clause, the parties agreed to resolve "any and all disputes arising out of or relating to this Agreement" by way of binding arbitration. ¹ The arbitration clause required that the site of any arbitration be in Anchor Glass' home city of Tampa, Florida.

In 1994, after two successive amendments of the Manufacturing Agreement to update pricing and supply provisions, Anchor Glass gave Riley notice of its intent not to renew the production-distribution arrangement. As a result, the Manufacturing Agreement expired by its own terms on July 31, 1994.

In January 1995, Riley discovered that Anchor Glass had sold various sun tea jars that incorporated several ornamental designs that allegedly were copies of certain Riley designs. As a result, Riley threatened a copyright suit against Anchor Glass. There is no evidence in the record as to whether Anchor Glass or Riley ever triggered the arbitration procedures of the Manufacturing Agreement for this particular dispute. In any event, the parties reached a Release and Settlement Agreement (the "Settlement Agreement") on July 5, 1995, to resolve the dispute.

Under the Settlement Agreement, Riley agreed to drop its threatened copyright suit, and Anchor Glass agreed to drop what apparently were its own threatened counterclaims. ² The language of the mutual releases constitutes an extremely broad waiver of "any and all" claims either party "now has or could ever have or become entitled to," which might arise under the Manufacturing Agreement. ³

In addition to these mutual releases, the Settlement Agreement also includes a series of provisions designed to reestablish a manufacturing relationship between Riley and Anchor Glass. Under Article IV, the parties agreed that Riley would manufacture nearly 400,000 sun tea jars for Anchor Glass during each of the 1996 and 1997 sun tea seasons. Furthermore, the parties agree that Anchor Glass is expected to cease using Riley's injection molds for its own sun tea products, but that if Anchor Glass does make short-term use of the molds, it would pay a prescribed royalty.

Finally, the Settlement Agreement includes a merger clause: "This Agreement constitutes the entire agreement of the parties hereto and cancels, terminates and supersedes any and all prior representations and agreements relating to the subject matter thereof." The crucial final phrase of this provision--i.e., the words "relating to the subject matter thereof"--is undefined and there is no cross-reference with other text in the Settlement Agreement.

Perhaps most importantly, the Settlement Agreement includes no arbitration provision and makes no mention of any other dispute resolution mechanisms. The Settlement Agreement also makes no reference to the arbitration clause of the Manufacturing Agreement.

In March 1996, some eight months after the Settlement Agreement resolved the first copyright dispute, Riley discovered that Anchor Glass was selling sun tea jars that incorporated three ornamental designs that allegedly infringed upon three of Riley's designs. Riley also discovered what it considered to be evidence that Anchor Glass and Trend had made unauthorized use of Riley's injection molds to produce copies of Riley's spigots. As a result, in June 1996, Riley filed the present suit in federal court. ⁴

Riley's suit alleges eight different causes of action, each of which separately attacks the three allegedly improper acts at issue in this case: copying Riley's ornamental designs, copying Riley's plastic spigot design, and copying Riley's trade dress in the overall appearance of its sun tea products. The eight causes of action are as follows:

I. Copyright infringement--for copying the ornamental designs.

II. Breach of contract--for violating the prohibitions in the Manufacturing Agreement and the Settlement Agreement against using Riley's molds as a template to make new molds, and for violating the Settlement Agreement's prohibition against using Riley's injection molds.

III. Unjust enrichment--for misappropriating Riley's trade secrets in the design of the spigots and other component parts.

IV. Common law trade dress infringement and unfair competition--for using trade dress on sun tea jars and spigots confusingly similar to Riley's trade dress.

V. Misappropriation of trade secrets--for misappropriating Riley's trade secrets in the design of the spigots.

VI. Conversion--for making unauthorized use of Riley's molds.

VII. Conspiracy--for conspiring to convert Riley's property and its trade secrets in its molds.

VIII. Tortious inference--against Anchor Glass, for interfering with Riley's distinct contractual relationship with Trend Plastics, and against Trend Plastics, for interfering with Riley's distinct contractual relationship with Anchor Glass.

In addition to money damages, including punitive and treble damages, Riley also sought preliminary and permanent injunctive relief.

Anchor Glass responded to Riley's complaint by filing a motion to dismiss or stay the suit pending arbitration, invoking the arbitration clause of the Manufacturing Agreement. The district court took up this motion at a scheduling conference, ruling that the broad language of the release in the Settlement Agreement released any obligation of Riley found in the Manufacturing Agreement to submit its claims to arbitration. The court also cited the merger clause of the Settlement Agreement as "buttressing" its conclusion. The court said the language of the release and merger clauses was unambiguous, and because of the clarity of this contract interpretation, there was no need to...