Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_07-cv-00201/USCOURTS-cand-3_07-cv-00201-9/pdf.json

Nature of Suit Code: 470
Nature of Suit: Civil (Rico)
Cause of Action: 18:1961 Racketeering (RICO) Act

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United States District Court

For the Northern District of California

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UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

JEFF POKORNY, LARRY BLENN, and

KENNETH BUSIERE, on behalf of

themselves and those similarly

situated,

Plaintiffs,

 v.

QUIXTAR INC., et al.,

Defendants.

 

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No. 07-00201 SC

ORDER GRANTING

DEFENDANTS' MOTION TO

STAY PROCEEDINGS

PENDING APPEAL

I. INTRODUCTION

The Court recently denied three motions to dismiss or stay

this action and to compel arbitration. See Order Denying

Defendants' Motions to Dismiss or Stay and to Compel Compliance

with Dispute Resolution Agreement ("Order"), Docket No. 115. 

Defendants Quixtar, Inc., Britt Worldwide, L.L.C., American

Multimedia, Inc., Britt Management, Inc., Bill Britt, Peggy Britt,

World Wide Group L.L.C., James Ron Puryear, Jr., and Georgia Lee

Puryear (collectively "Defendants") have appealed that Order. See

Docket No. 118. Defendants now move to stay this action pending

the outcome of the appeal. Docket No. 123 ("Motion"). For the

reasons set forth below, the Court GRANTS Defendants' Motion and

STAYS this action pending appeal.

Case 3:07-cv-00201-SC Document 127 Filed 04/17/08 Page 1 of 5
United States District Court

For the Northern District of California

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II. DISCUSSION

A. Legal Standard

Under Section 16(a) of the Federal Arbitration Act ("FAA"), 9

U.S.C. § 1, et seq., an order denying a motion to compel

arbitration is immediately appealable. See 9 U.S.C. § 16(a). 

Such an appeal does not automatically divest this Court of

jurisdiction. Britton v. Co-op Banking Group, 916 F.2d 1405,

1411-12 (9th Cir. 1990). However, the district court may, at its

discretion, stay the proceedings on the merits while the appellate

court considers the question of arbitrability. Id. at 1412. Four

factors guide the court's discretion in deciding whether or not to

stay the proceedings: "(1) whether the stay applicant has made a

strong showing that he is likely to succeed on the merits; (2)

whether the applicant will be irreparably injured absent a stay;

(3) whether issuance of the stay will substantially injure the

other parties interested in the proceeding; and (4) whether public

interest favors a stay." Winig v. Cingular Wireless LLC, No.

C-06-4297 MMC, 2006 U.S. Dist. LEXIS 83116, at *2 n.1 (N.D. Cal.

Nov. 6, 2006) (quoting C.B.S. Employees Fed. Credit Union v.

Donaldson, 716 F. Supp. 307, 309 (W.D. Tenn. 1989)). The first

element addresses the merits of the appeal, not the merits of

subsequent proceedings in the district court, and it is satisfied

where the moving party shows that it has raised a "serious legal

question" on appeal. Id. 

B. Analysis

All four factors set forth above favor a stay in the present

matter. Defendants have raised two serious legal questions on

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Defendants assert that several other federal courts "reached

exactly the opposite holding." Mot. at 4 n.4. This overstates the

case significantly. With one exception, none of those cases

applied California law, and many did not address the full scope of

legal issues the Plaintiffs presented here in their opposition to

the motions to compel arbitration (i.e., they addressed one

provision of the agreement, such as arbitrator selection or

confidentiality, but not all of the challenges Plaintiffs raised). 

Though those courts reached different conclusions, they were not

faced with identical questions of law. 

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appeal, satisfying the first factor. The first question is the

resolution of an apparent split between this Court's ruling on the

motion to compel arbitration and the rulings of a number of other

state and federal courts.1

 Numerous courts have found Defendants'

ADR agreement enforceable, at least in part, while the Court's

Order here struck down the entire agreement as procedurally and

substantively unconscionable, and therefore unenforceable. Such

conflicting rulings demonstrate that the law is unsettled and

guidance from the appellate court would be beneficial. See, e.g., 

Jones v. Deutsche Bank AG, No. C-04-5357 JW, 2007 U.S. Dist. LEXIS

39094, at *6-7 (N.D. Cal. May 17, 2007). Similarly, Defendants

argue that the applicability of the holding in Wolsey, Ltd. v.

Foodmaker, Inc., 144 F.3d 1205 (9th Cir. 1998), is unsettled. The

Court found that Wolsey did not govern, but Defendants have

identified other courts that disagreed, and enforced provisions

requiring non-binding mediation as a precursor to arbitration or

litigation. As this is a controlling issue of law, a stay is

warranted until the appellate court determines whether Wolsey

governs.

The second factor also favors staying this action pending the

appeal. Absent a stay, Defendants could spend substantial time

Case 3:07-cv-00201-SC Document 127 Filed 04/17/08 Page 3 of 5
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2After Plaintiffs filed the First Amended Complaint, the

parties submitted supplemental briefs addressing whether or not the

newly-added claims for injunctive relief were arbitrable. The

Court did not reach that question because it found the entire ADR

agreement unenforceable.

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and resources on the litigation, only to have the appellate court

reverse the Order and compel arbitration after the fact. In that

situation, the primary benefits of ADR — speed and economy — would

have been lost. See, e.g., Winig, 2006 U.S. Dist. LEXIS 83116, at

*6 (citing Alsacom, Inc. v. ITT N. Elec. Co. , 727 F.2d 1418, 1422

(9th Cir. 1984)). 

The third factor also supports a stay. Plaintiffs Pokorny

and Blenn have terminated their relationships with Defendants, and

will not incur any further damages as a result of the delay. 

Defendants previously agreed to preserve all evidence, so a stay

pending appeal will not prejudice Plaintiffs' ability to conduct

discovery and prosecute the action should it go forward after the

appeal. Although Plaintiff Busiere brought claims for injunctive

relief in the First Amended Complaint, it is possible that those

claims may be subject to arbitration following the appeal, so it

would still be premature to begin litigating them at this time.2

Finally, the same benefits of ADR that tip the second factor

in favor of a stay also serve the public interest. The speed and

efficiency of ADR are the foundation for a strong federal policy

favoring arbitration over litigation, which would be contravened

by requiring the parties to litigate while the appeal is pending. 

See id. at *9 (citing Moses H. Cone Mem'l Hospital v. Mercury

Constr. Corp., 460 U.S. 1, 24 (1983). The fourth factor — the

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public interest — therefore also favors a stay.

III. CONCLUSION

For the foregoing reasons, the Court hereby GRANTS

Defendants' Motion and STAYS this action pending appeal.

IT IS SO ORDERED.

Dated: April 17, 2008

 UNITED STATES DISTRICT JUDGE

Case 3:07-cv-00201-SC Document 127 Filed 04/17/08 Page 5 of 5