Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_14-cv-04022/USCOURTS-cand-3_14-cv-04022-4/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Other Contract

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United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

ADESA, INC.,

Plaintiff,

v.

EDWIN BERKOWITZ, et al.,

Defendants.

Case No. 14-cv-04022-VC 

ORDER OF DISMISSAL WITH 

PREJUDICE

Re: Dkt. Nos. 29, 30

ADESA, Inc. is embroiled in a dispute with its two former employees, Edwin Berkowitz 

and Blake Kennedy. In this lawsuit, ADESA accuses Berkowitz and Kennedy of, among other 

things, refusing to return the company's confidential information when they quit their jobs and 

misusing that information in their new jobs. 

The employment contracts between ADESA and the two former employees contain 

arbitration provisions that unquestionably apply to this dispute. Under the contract, the only 

possible role for a court would be to entertain an application for provisional relief under California

Code of Civil Procedure Section 1218.8(b). 

Under Section 1218.8(b), a court may grant provisional relief in a dispute that's subject to 

arbitration if such relief is necessary to prevent a future arbitration award from being "rendered 

ineffectual." Id. "The logical reason . . . that an applicant be required to show that an arbitration 

award may be rendered ineffectual [before obtaining relief under Section 1218.8(b)] is to ensure 

that the court does not invade the province of the arbitrator – i.e., the court should be empowered 

to grant provisional relief in an arbitrable controversy only where the arbitrator's award may not be 

adequate to make the aggrieved party whole." Woolley v. Embassy Suites, Inc., 227 Cal. App. 3d 

1520, 1527 (1991).

Case 3:14-cv-04022-VC Document 47 Filed 01/21/15 Page 1 of 4
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United States District Court

Northern District of California

Berkowitz and Kennedy have moved to dismiss the first amended complaint on the ground 

that ADESA could easily have sought provisional relief in arbitration had it not delayed in 

initiating the arbitration. That motion is granted. ADESA's conduct up to this point belies any 

argument that it needs any form of relief from a court that it could not, in the exercise of even 

minimal diligence, have already obtained from an arbitrator. 

This dispute first arose in July 2014 when Berkowitz and Kennedy resigned, went to work 

for ADESA's competitor, and allegedly took the company's confidential information with them. 

ADESA filed suit in this Court on September 4, 2014. The complaint did not seek provisional 

relief, nor was it accompanied by an application for a temporary restraining order ("TRO") or a 

motion for a preliminary injunction. ADESA also did not initiate arbitration proceedings at the 

time it filed the complaint.

The defendants moved to dismiss the complaint, and on November 20, 2014, the Court 

granted the motion on the ground that the complaint sought the same relief that ADESA would be 

seeking in arbitration – relief that only the arbitrator, and not the court, would be authorized to 

grant. The Court gave ADESA leave to amend its complaint to include a prayer for provisional 

relief to preserve the status quo pending arbitration, and the next day ADESA filed a complaint 

which complied with that instruction. But ADESA still did not file a TRO application or a motion 

for preliminary injunction.

On November 18, 2014 – two days before the Court dismissed the original complaint –

ADESA finally initiated arbitration proceedings with the American Arbitration Association. But

even when ADESA finally initiated arbitration proceedings, it did not do so correctly. In 

contravention of the American Arbitration Association's rules, ADESA did not attach to its claims 

the arbitration provisions in its employment contracts with Berkowitz and Kennedy. And after 

ADESA corrected this defect, the Arbitration Association informed ADESA that it had failed to 

pay the full arbitration filing fee.

Meanwhile, the defendants moved to dismiss the first amended complaint and noticed a 

hearing for January 15, 2015. Two days before the hearing, ADESA filed a motion for a 

preliminary injunction. This was the first time it had applied for provisional relief.

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United States District Court

Northern District of California

If there was truly a time-sensitive need to preserve the status quo until the matter could be 

teed up in front of an arbitrator, one would have expected ADESA to file a TRO application 

shortly after the dispute arose. At a minimum, one would have expected ADESA to seek a TRO 

or preliminary injunction when it filed its federal lawsuit on September 4, 2014. One would also 

have expected ADESA to have initiated arbitration proceedings promptly. Instead, ADESA 

waited until November 18, 2014 to initiate arbitration proceedings, and even then it failed to do so 

properly. And it waited until January 13, 2015 to seek provisional relief from this Court – six 

months after the defendants allegedly misappropriated (and began misusing) the company's 

confidential information. 

It would be one thing if ADESA had – promptly after the dispute arose – sought 

provisional relief in this Court and argued that such relief was needed to prevent Berkowitz and 

Kennedy from misusing confidential information before the matter could be presented to an 

arbitrator. It is quite another thing to: (i) delay in the initiation of arbitration proceedings; (ii) file 

a complaint in federal court but not seek provisional relief; and then (iii) file a motion six months 

after the dispute arose, contending that provisional relief is needed to preserve the status quo 

pending arbitration. If ADESA had exercised even the most minimal diligence in initiating 

arbitration proceedings, its January 13 motion for a preliminary injunction could easily have been 

before the arbitrator by now. By definition, therefore, there is no need for a court to consider an 

application for provisional relief to preserve the status quo pending arbitration. To the contrary, if 

the Court were to entertain a request for provisional relief at this stage, the Court would become 

complicit in ADESA's delay and its apparent effort to have the Court "invade the province of the 

arbitrator." Woolley, 227 Cal. App. 3d at 1527. 

The first amended complaint is therefore dismissed. Dismissal is with prejudice, because 

there is no conceivable set of circumstances in which the Court would exercise its discretion to 

award provisional relief that an arbitrator, but for ADESA's conduct, would easily be in a position 

to award right now.

The Court declines to award Berkowitz and Kennedy contractual attorneys' fees – not 

because they don't deserve it, but because that too is within the province of the arbitrator.

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United States District Court

Northern District of California

IT IS SO ORDERED.

Dated: January 20, 2015

______________________________________

VINCE CHHABRIA

United States District Judge

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