Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_08-cv-00227/USCOURTS-azd-2_08-cv-00227-0/pdf.json

Nature of Suit Code: 820
Nature of Suit: Copyright
Cause of Action: 15:1051 Trademark Infringement

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Aerisa, Inc., a Delaware corporation, 

Plaintiff, 

vs.

Plasma-Air International, a Connecticut

corporation; Terry A. Busskohl; Clifford

Miller; Lawrence Sunshine; John Collins,

individuals, 

Defendants. 

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No. CV 08-227-PHX-NVW

ORDER

Before the court is Defendants’ Motion to Compel Mediation and Arbitration

(doc. # 32). This motion will be denied. Only one Defendant is a party to the contract

containing the arbitration clause at issue, and that Defendant has waived the right to

invoke the arbitration clause by filing a parallel lawsuit against Plaintiff in New York.

I. Background

In August 2006, Aerisa’s predecessor in interest and Clifford Miller (“Miller”)

were parties to a Wind-Up Agreement that is the subject of Aerisa’s complaint. The

Wind-Up Agreement provides that Arizona law governs the force and construction of its

terms. The Defendants seek to invoke Section 13 of the agreement, which provides in part

that “[t]he parties expressly agree to submit any dispute between them arising out of or

Case 2:08-cv-00227-NVW Document 38 Filed 12/11/08 Page 1 of 4
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relating to this Agreement . . . to mediation, and, if necessary, arbitration . . . .” They

argue that Aerisa’s suit arises out of the agreement and is therefore subject to arbitration.

Aerisa does not dispute that its suit arises out of the agreement. It opposes

Defendants’ motion on the grounds that Miller is the only Defendant who was party to

this agreement, and on the grounds that Miller himself waived his right to invoke this

provision by filing his own suit. Aerisa also argues that its substantive claims and its

Motion for a Preliminary Injunction (doc. # 17) are not subject to arbitration. Before

filing his Motion to Compel, Miller, along with co-Defendants Plasma Air International

and Lawrence Sunshine, had filed suit against Aerisa and other parties in the Southern

District of New York. (Doc. # 19-3) (Complaint, Plasma Air Int’l, Inc. v. Aerisa, Inc.,

No. CV 08-02415 (S.D.N.Y. Mar. 10, 2008)). 

II. Analysis

The plain language of the arbitration provision confirms that Miller is the only

Defendant who may invoke it. The provision states that “[t]he parties expressly agree to

submit any dispute between them” to arbitration. Therefore, the scope of the arbitration

provision does not, on its face, extend to any dispute between Aerisa and the other, nonsignatory Defendants. Defendants cite Western Agricultural Insurance Company v.

Chrysler Corp. for the proposition that an arbitration provision may be enforced with

respect to a dispute where one of the defendants was not party to the arbitration

agreement. 198 Ariz. 64, 68, 6 P.3d 768, 772 (App. Ct. 2000). It is true that sometimes a

third party may invoke an arbitration clause. Western Agricultural holds that a third party

can invoke an arbitration clause if it has agreed to indemnify one of the parties to the

agreement and essentially “stands in the shoes” of that party. Id. at 68, 6 P.3d at 772. 

Defendants have presented no such facts, however, so their passing citation to Western

Agricultural does not defeat the agreement’s terms.

The question then arises whether Defendant Miller may still compel arbitration of

the suit against him, or whether he has waived the benefits of the arbitration provision by

filing suit in New York. “Public policy favors arbitration” and therefore waiver of an

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arbitration clause is generally not favored. Meineke v. Twin City Fire Ins. Co., 181 Ariz.

576, 581, 892 P.2d 1365, 1370 (Ct. App. 1994). Nonetheless, when a party seeks redress

through the courts instead of the arbitration tribunal seeking the same relief that the

arbitrator is empowered to grant, the party waives the right to compel arbitration of the

issue. Bolo Corp. v. Homes & Son Constr. Co., 105 Ariz. 343, 347, 464 P.2d 788, 792

(1970).

Miller has waived his right in this manner. Miller’s New York complaint seeks a

declaration that “any restrictions imposed upon [Miller’s] ability to compete set forth in

the Wind-Up Agreement were removed when the non-competition agreements terminated

on February 1, 2007” and a declaration that Plasma Air owns the rights at issue in this

case. Miller also seeks injunctive relief and damages against Aerisa flowing from

Aerisa’s asserted ownership of the rights at issue. These claims require and expressly call

for an interpretation of the Wind-Up Agreement; they are arbitrable under that agreement

and their assertion constitutes waiver. 

There is no merit to Miller’s claim that his New York action “does not arise out of

or relate to the Wind-Up Agreement” because Miller predicates that claim on a separate

agreement, the 2006 Memorandum of Understanding. It is not at all clear that such artful

pleading would successfully avoid waiver where the claim may yet require interpretation

of the contract containing the arbitration clause. Regardless, however, that issue need not

be decided because Miller did not plead around the Wind-Up Agreement. The New York

complaint seeks damages and an injunction relating to the force of the Wind-Up

Agreement. It also seeks a declaration that would interpret that agreement’s terms and

establish the rights of Plasma-Air. This prayer for a declaratory judgment confirms that

the action is a mirror-image of Aerisa’s suit. The interpretation of the Wind-Up

Agreement would necessarily—and does in fact—appear as an element of a complaint

filed by Aerisa to enforce the rights in dispute. Miller’s New York action thus arises out

of and relates to the Wind-Up Agreement. Cf. Mobil Oil Corp. v. City of Long Beach,

772 F.2d 534, 539 (9th Cir. 1985) (holding that a declaratory judgment action arises

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under federal law if the federal issue would appear as a necessary element of a

well-pleaded complaint filed to enforce the rights in dispute). It constitutes a waiver of

any right he might have had to compel arbitration in this case.

Because the above analysis disposes of the Motion to Compel arbitration as to all

Defendants, it is not necessary to reach Aerisa’s remaining arguments.

IT IS THEREFORE ORDERED that Defendants’ Motion to Compel Mediation and

Arbitration (doc. # 32) is denied.

DATED this 11th day of December, 2008.

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