Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_04-cv-02248/USCOURTS-casd-3_04-cv-02248-0/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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04CV2248

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

NICKEL, LTD. and FALKEN

INDUSTRIES, LTD.,

Plaintiffs,

v.

PURE BIOSCIENCE fka INNOVATIVE

MEDICAL SERVICES,

Defendant.

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Civil No. 04-CV-2248-L(NLS)

ORDER DENYING MOTION FOR

STAY OF ARBITRATION PENDING

APPEAL OF THE COURT’S ORDER

TO ARBITRATE [doc. #29] 

On February 13, 2006, plaintiff Nickel, Ltd. (“Nickel”) filed a motion for a stay pending

appeal of the Court’s September 30, 2005 Order that compelled plaintiff to arbitrate, in San

Diego county, a claim filed by Pure Bioscience (“Pure”). The motion has been fully briefed. 

For the reasons set forth below, the Court enters the following decision.

Background

The factual background of the dispute in the above-captioned case is substantially the

same as that found in Pure Bioscience v. Falken Industries, Ltd., 04-CV-1147-L(NLS), and Pure

Bioscience v. Falken, 05-CV-2020-L(NLS). A brief recitation of facts is helpful. 

On October 2003, Pure filed its AAA statement of claims against NVID International,

Falken Industries Ltd. and an individual. The arbitration concerned alleged breaches of a 2001

Settlement Agreement which contained an arbitration provision. Pure’s claim against NVID

Case 3:04-cv-02248-L-NLS Document 45 Filed 09/27/06 Page 1 of 7
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1 Currently pending before the Ninth Circuit Court of Appeals is Pure’s motion to

dismiss the appeal in 04-CV-2248-L(NLS) that was filed on July 26, 2006 and raises

substantially the same arguments raised in the appeal of the decision in 04-CV-1147-L.

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proceeded to hearing before the arbitrator but Falken did not participate in the arbitration and the

arbitration as to Falken was bifurcated while Falken challenged whether it was subject to

arbitration under the Settlement Agreement. 

On June 9, 2004, Pure filed a motion to compel arbitration in this court which was

granted on January 4, 2005. See Case Number 04-CV-1147-L(NLS). Falken filed a Notice of

Appeal with the Ninth Circuit Court of Appeal with respect to the Court’s finding that Falken

would be compelled to arbitrate on the basis of estoppel. But as a result of the Court’s Order,

the arbitral hearing against Falken began on August 8, 2005 and continued for nine days. On

October 12, 2005, the arbitrator entered an award in favor of Pure. On October 25, 2005, Pure

filed a petition for entry of judgment on arbitral award which was assigned case number 05-CV2020. The Court granted that petition on January 18, 2006. On February 7, 2006, Falken filed a

motion to set aside that order. The Court recently denied that motion.

On November 9, 2004, Nickel and Falken filed the above-captioned case against Pure

seeking a declaration that plaintiffs were not parties to an arbitration agreement. In response,

Pure filed a petition for order compelling Nickel to arbitration which the Court granted. 

Thereafter, Nickel and Falken filed a Notice of Appeal to the Ninth Circuit Court of Appeals. 

The appeal filed in the present case, 04-CV-2248-L(NLS), remains pending but raises the same

arguments that were raised in the appeal of 04-CV-1147-L(NLS).1

 On February 24, 2006, the

appeal in 04-CV-1147-L(NLS) was dismissed for lack of jurisdiction. See Ninth Circuit Order

05-55203 (District Court No. 04-CV-1147-L, doc. #56). Falken filed a motion for

reconsideration of the dismissal of the appeal. The Ninth Circuit denied the motion for

reconsideration on April 19, 2006 and the mandate was issued on April 27, 2006.

Nickel now moves to stay the arbitration pending resolution of the still-pending appeal.

Pure objects to a stay.

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Legal Standard

The standard for a stay pending appeal is comparable to that used by a district court in

evaluating a motion for preliminary injunction. Specifically, the movant must show a

probability of success on appeal, the relative hardships to the parties “(whether moving party

would suffer irreparable injury absent a stay/injunction vs. whether opposing parties would

suffer substantial injury were a stay/injunction to be granted),” and the public interest. 1

Dorothy W. Nelson et al., Federal Ninth Circuit Appellate Practice § 6:268 at 6-40 (The Rutter

Group 2001); Hilton v. Braunskill, 481 U.S. 770, 776 (1987). One treatise explains, “the

standard for a stay or injunctive relief forms a continuum: At one end of the continuum, the

moving party must show both a probability of success on the merits and the risk of irreparable

injury. At the other end, the moving party must demonstrate the appeal raises serious legal

questions and the balance of hardships tips in his or her favor. The relative hardships to the

parties and the public interest are the critical elements in deciding at which point along the

continuum a stay or injunction is warranted.” 1 Dorothy W. Nelson et al., Federal Ninth Circuit

Appellate Practice § 6:269 at 6-40 (The Rutter Group 2001). The existence of a serious legal

question does not have to promise a certainty of success, but it must present a “fair chance” of

success on the merits. Gilder v. PGA Tour, Inc., 936 F.2d 417, 422 (9th Cir. 1991); 1 Dorothy

W. Nelson et al., Federal Ninth Circuit Appellate Practice § 6:273 at 6-41 (The Rutter Group

2001). 

Discussion

1. Irreparable Harm 

Although Nickel acknowledges that litigations costs rarely constitute irreparable injury,

Nickel contends that in the circumstances presented here, it will suffer irreparable injury unless a

stay is granted. Nickel argues that because it is a New Jersey corporation, its principle place of

business was in Paris, France, and the company has ceased doing business, its resources are

limited and it does not have the financial ability to undertake both the costs of arbitration and its

appeal of the order compelling it to arbitrate. 

The Ninth Circuit has made clear "that unnecessarily undergoing arbitration proceedings

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[does not] constitute[ ] irreparable injury" and consequently, respondent's success hinges on

whether the balance of hardships tips in its favor. Camping Constr. Co. v. Dist. Council of Iron

Workers, 915 F.2d 1333, 1349 (9th Cir. 1990) (noting that "the party objecting to arbitration

might well suffer no harm at all, irreparable or otherwise, for the arbitration panel might decide

in its favor"); see also Graphic Commc'ns Union v. Chi. Tribune Co., 779 F.2d 13, 15 (7th Cir.

1986) (holding that even where the appellate court might determine that the trial court

erroneously ordered the parties arbitrate a dispute they had not agreed to arbitrate, "the cost of

the arbitration, whether it is an opportunity cost of time or an out-of-pocket expense . . . does not

show irreparable harm"). Thus, the cost of arbitration and/or a likelihood of reversal do not

constitute irreparable harm. Accordingly, Nickel must show that requiring it to proceed with the

ordered arbitration while its appeal is pending will cause it irreparable harm beyond financial 

cost and possible reversal. 

Although Nickel’s showing of irreparable harm consists largely of monetary losses,

Nickel suggests that it may suffer irreparable harm by having to arbitrate Pure’s claims in the

absence of a clear agreement to do so. Textile Unlimited, Inc. v. ABMH and Co., 240 F.3d 781,

786 (9th Cir. 2001) (noting that district court's finding that plaintiff would suffer irreparable

harm if arbitration were not stayed was not erroneous, although finding was not challenged on

appeal). The Court will accept as true that some irreparable harm may exist when a party is

forced to forego an appeal because of the cost associated with an arbitration. Here, however, 

Nickel’s statement that it must choose one venue over the other is nothing more than an

unsupported assertion and speculative. See Goldie's Bookstore v. Superior Court, 739 F.2d 466,

472 (9th Cir. 1984)(A finding of irreparable harm must be based on more than speculative

assertions.). Given Nickel’s current active litigation in Europe, the Court cannot find that Nickel

is genuinely faced with a Hobson’s choice.

Nickel also contends that if the arbitration goes forward and the decision is adverse to it,

Nickel will be hampered significantly in appealing the legal issue of binding a non-signatory to

an arbitration agreement because of the narrow grounds for challenging an arbitration award. 

See 9 U.S.C. § 10(a)(1), (2) (the grounds that permit a district court to vacate or modify an

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arbitration award are very narrow and are limited to circumstances unrelated to the merits, e.g.,

an award is procured by corruption, fraud or undue means or is rendered by a partial or corrupt

arbitrator.). Although Nickel is correct that a motion to vacate an arbitration award is 

narrowly circumscribed, here the legal issue of compelling arbitration was determined by the

district court and that decision would be subject to further review when a final judgment has

been entered. This argument does not support a finding of irreparable harm.

Further, even accepting as true that Nickel would suffer some irreparable harm by being

compelled in error to arbitrate, when coupled with an extremely weak showing of probability of

success on the merits, as discussed below, the Court finds a stay unwarranted. 

2. Success on the Merits. 

Although the underlying issue Nickel seeks to appeal i.e., whether a non-signatory can be

bound to arbitrate by estoppel, presents a unsettled legal question, the actual appeal likely will

not reach that issue and will instead focus on whether an interlocutory appeal can be taken from

an order compelling arbitration when the basis for arbitration is estoppel. If the Ninth Circuit is

consistent with its earlier dismissal of the appeal in 04-CV-1147-L(NLS), Nickel’s appeal will

also be dismissed for lack of jurisdiction as an interlocutory appeal and the merits of the appeal

not reached. As noted, the Ninth Circuit reviewed a similar motion to dismiss in the appeal of

04-CV-1147-L(NLS) and dismissed that appeal. Thus, Nickel has not made a showing of

probable success on the merits. 

3. Balance of Hardships

Next, the balance of hardships does not favor granting the stay. Nickel estimates that the

amount of fees and costs that will be incurred if the arbitration is not stayed pending appeal

would be in excess of $125,000. Because the appeal likely will be dismissed without reaching

the merits of the underlying issue, the appeal will not engender large fees as predicted by Nickel.

The Court notes that Pure’s motion to dismiss the appeal is fully briefed before the Ninth Circuit 

and the appellate court has already considered and decided the issue of jurisdiction on the same

grounds in the appeal of 04-CV-1147-L(NLS). Thus, it is likely that the Ninth Circuit will make

a prompt decision without further briefing being required from Nickel. Pure, however, will be

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subjected to further delay if the stay is granted. Thus, the balance of hardships does not tip in

Nickel’s favor.

4. Public Interest

Finally, consideration of the public interest does not support a stay. Even if the public

interest favoring arbitration is inapplicable in this case, this fact does not prove the opposite – 

that the public has an important interest in not arbitrating this matter. At most, the public has

only a generic interest in seeing that federal law is properly applied, which is true of any case

and thus cannot justify the extraordinary remedy sought by Nickel. Mazurek v. Armstrong, 520

U.S. 968, 972 (1997) ("[A] preliminary injunction is an extraordinary and drastic remedy . . . ."

(quotation omitted)); Reading & Bates Petroleum Co. v. Musslewhite, 14 F.3d 271, 275 (5th Cir.

1994) ("Stays pending appeal constitute extraordinary relief...."). Consequently, the public

interest does not favor a stay of arbitration pending appeal. 

Conclusion

Applying the factors to the present case, the Court finds Nickel has not met its burden to

warrant a stay of the arbitration pending appeal and accordingly, a stay is not appropriate under

the circumstances of this case. 

Based on the foregoing, IT IS ORDERED denying plaintiff Nickel, Ltd.’s motion for

stay pending appeal. [doc. #29].

IT IS SO ORDERED.

DATED: September 27, 2006

M. James Lorenz

United States District Court Judge

COPY TO: 

HON. NITA L. STORMES

UNITED STATES MAGISTRATE JUDGE

ALL PARTIES/COUNSEL

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