Court Opinion

ID: 1042204
Source: CourtListenerOpinion
Date Created: 2013-09-26 18:43:21.135626+00
Date Added: 2024-06-11T15:14:44.151486
License: Public Domain

UNPUBLISHED

                    UNITED STATES COURT OF APPEALS
                        FOR THE FOURTH CIRCUIT

                               No. 13-1423

JOHN L. DEROSA,

                  Plaintiff - Appellee,

          v.

J. P. WALSH & J. L. MARMO ENTERPRISES, INC., a Delaware
Corporation,

                  Defendant – Appellant.

Appeal from the United States District Court for the Eastern
District of Virginia, at Alexandria.    Claude M. Hilton, Senior
District Judge. (1:10-cv-00287-CMH-TRJ)

Submitted:   August 16, 2013               Decided:   September 26, 2013

Before MOTZ, AGEE, and THACKER, Circuit Judges.

Affirmed by unpublished per curiam opinion.

Thomas P. Pavelko, Daniel P. Mullarkey, NOVAK DRUCE CONNOLLY
BOVE & QUIGG, LLP, Washington, D.C., for Appellant. William E.
Hassan, Fairfax, Virginia, for Appellee.

Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:

             Appellant, J.P. Walsh & J.L. Marmo Enterprises, Inc.

(“Marmo”),      appeals   the    district   court’s   order    denying    with

prejudice its motion to lift stay and reinstate the case to the

active docket.     Finding no abuse of discretion, we affirm.

                                      I.

           By agreement dated November 9, 1998, Appellee, John L.

DeRosa (“DeRosa”), assigned the exclusive patent rights to his

“DeRosa Chuck” invention to Marmo.          In exchange, Marmo agreed to

manufacturer and sell the invention          and to pay DeRosa a certain

percentage of the sales.          In March 2010, apparently unsatisfied

with   Marmo’s    efforts   to   manufacture   and    sell    his   invention,

DeRosa filed a complaint in Virginia state court alleging breach

of   contract    and   seeking    rescission    of    the    contract.     The

complaint alleged, in relevant part:

       [T]he failure by [Marmo] to abide by its contractual
       and financial obligations under the contract have
       denied [DeRosa] the bargained for benefit thereof,
       that is the steady flow of manufacturing business and
       the timely payment for the product by [Marmo] which
       may be remedied only by rescission or cancellation of
       the contract and the restoration of ownership of the
       patent rights in [DeRosa]’s intellectual property, his
       invention, the DeRosa Chuck.

                                       2
Compl. ¶ 20. 1        On March 25, 2010, Marmo removed this action to

the United States District Court for the Eastern District of

Virginia.

              Marmo     filed    its   Answer     on        April       10,   2010,    which

included a counterclaim for patent infringement against DeRosa.

DeRosa      thereafter    filed    a   motion         to    stay    the       case    pending

binding arbitration and to select an arbitrator.                               The parties

had    previously       agreed    that    their        dispute          was    subject    to

arbitration pursuant to paragraph five of the contract, but they

could not agree on an arbitrator.                 Marmo opposed the motion to

the    extent     that    it     believed       its        counterclaim        for     patent

infringement should go forward in the district court.                                After a

hearing, the district court granted DeRosa’s motion and ordered

“that this case is STAYED pending arbitration and is REMOVED

from the active docket of the court.”                  J.A. 142.

              After several months of inaction by the parties, Marmo

filed a motion to hold DeRosa in contempt for its failure to

comply with the district court’s order of arbitration.                                 Marmo

also       “suggested    that    the     Court    fashion           a    remedy       whereby

[Marmo]’s counterclaim for patent infringement will be severed

from [DeRosa]’s claim for arbitration and be permitted to move

       1
       The Complaint is found at J.A. 16-20.   Citations to the
“J.A.” refer to the Joint Appendix filed by the parties in this
appeal.

                                            3
forward.”     J.A. 153.     The district court denied Marmo’s motion

to hold DeRosa in contempt and instead appointed an arbitrator

and directed counsel to “proceed forthwith with arbitration.”

Id. at 156.

            After the district court’s second order directing the

parties to arbitrate, DeRosa prepared a “Short Form” Agreement

to    Arbitrate,   specifying,      “Mr.   DeRosa   seek[s]    damages     and

rescission for breach of contract for assignment of a patent;

[Marmo] counter sue[s] for patent infringement and injunctive

relief.”    J.A. 247.     Marmo responded with its own statement of

arbitratable issues, indicating that patent infringement should

not be included in arbitration and “will be pursued in the court

by [Marmo] once the Arbitration is completed.”             Id. at 250.      In

response, DeRosa’s counsel stated, “[w]ithout agreeing to the

allegations or legal assertions made in [Marmo]’s statement of

issues or waiving the right to make submissions pursuant to a

schedule established by the arbitrator, [DeRosa] consent[s] to

allowing [Marmo]’s attachment to the agreement to arbitrate.”

Id.   at   253.    The    parties   then   submitted   a   proposed      joint

statement     of   arbitratable     issues,    which   did    not   include

references to patent infringement.

            The parties proceeded to arbitration.            The arbitrator

found Marmo in breach of the assignment contract and awarded

damages to DeRosa.        However, the arbitrator declined to rescind

                                      4
the contract.     DeRosa subsequently filed a motion to confirm the

arbitration award, which Marmo joined.           In addition, Marmo filed

a motion to lift stay and reinstate the case to the active

docket, arguing that the issue of patent infringement was not

submitted to the arbitrator and should therefore be decided by

the court.

           The district court denied Marmo’s motion, concluding

that patent infringement was “a matter that should have gone

before the arbiter and should have been resolved by him.”                J.A.

291.    The court reasoned that the parties “went to arbitration

on anything involved in [the] contract or arising out of [the]

contract” and that “[a]ny damages that come from the use of

those   patents   arose   out   of   [the]     contract,”    including   any

damages for patent infringement.           Id. at 290.      Accordingly, on

April 6, 2012, the district court denied with prejudice Marmo’s

motion to lift stay and reinstate the case to the active docket.

Marmo appeals the denial of this motion.

                                     II.

           “[T]he power to stay proceedings is incidental to the

power inherent in every court to control the disposition of the

causes on its docket with economy of time and effort for itself,

for counsel, and for litigants.”           Landis v. N. Am. Co., 299 U.S.
248, 254 (1936).       Therefore, we review the exercise of this

power under an abuse of discretion standard.                See Maryland v.

                                      5
Universal Elections, Inc., –-- F.3d –––-, 2013 WL 3871006, at *2

(4th Cir. 2013) (citing United States v. Ga. Pac. Corp., 562
F.2d 294, 297 (4th Cir. 1977)). 2

                                            III.

               Marmo contends the district court erred by refusing to

lift the stay because patent infringement was not an issue that

was subject to arbitration.                      However, Marmo has not appealed

either    of       the   district      court’s       orders     compelling   arbitration

between the parties.            Marmo cannot now take issue with the scope

of arbitration by appealing the district court’s refusal to lift

the stay.

               A     district     court      “may          compel   arbitration    of    a

particular         dispute      only      when       the    parties   have    agreed    to

arbitrate their disputes and the scope of the parties’ agreement

permits    resolution        of     the    dispute         at   issue.”      Muriithi   v.

Shuttle Express, Inc., 712 F.3d 173, 179 (4th Cir. 2013).                              When

a court anticipates that some of the claims in the litigation

     2
       Marmo urges us to review the district court’s denial of
the motion to lift stay under a de novo standard. However, the
cases Marmo cites in support of its position are inapposite.
Additionally, while it is true that the “determination of the
arbitrability of a dispute is subject to de novo review,” Kansas
Gas & Elec. Co. v. Westinghouse Elec. Corp., 861 F.2d 420, 422
(4th Cir. 1988), Marmo does not appeal either of the district
court’s orders directing the parties to arbitrate.      Instead,
Marmo appeals only the district court’s denial of the motion to
lift stay.    Therefore, we find it appropriate to review the
district court’s action for abuse of discretion.

                                                 6
might   not    be     arbitratable,        “the       court    must      sever        and    compel

arbitration of all arbitratable claims and reserve jurisdiction

of any non-arbitratable claims.”                      B & R Assocs. v. Dependable

Ins. Co., 835 F.2d 526, 528 (4th Cir. 1987).

              Here,       the    district           court     twice      rejected           Marmo’s

contention         that     patent       infringement             was        not     subject     to

arbitration,        thereby          defining       the     scope       of     arbitration       as

including      patent       infringement.                 First,    the        district       court

considered and rejected Marmo’s argument that its counterclaim

for patent infringement should proceed when it stayed all claims

in   the   case      pending         resolution       of    the     binding         arbitration.

Second, by denying Marmo’s motion to hold DeRosa in contempt,

the district court did not adopt Marmo’s “suggest[ion] that the

Court fashion a remedy whereby [Marmo]’s counterclaim for patent

infringement         will       be     severed        from     [DeRosa]’s             claim     for

arbitration and be permitted to move forward.”                               J.A. 153.

              By     rejecting          Marmo’s       attempts          to         exclude     from

arbitration its patent infringement claim, the district court

thus defined the scope of arbitration—namely, all claims in the

case, including Marmo’s counterclaim for patent infringement—and

it declined to reserve jurisdiction over any non-arbitratable

claims.     To the extent Marmo now takes issue with the scope of

arbitration, it should have sought review of the arbitration

orders themselves.              Because Marmo failed to do so, we cannot

                                                7
reach   the    issue   of    whether     Marmo’s        counterclaim   for    patent

infringement was outside the scope of the contract’s arbitration

clause.

              Marmo’s counterclaim for patent infringement was one

that, under the district court’s orders compelling arbitration,

Marmo   should    have      pursued    at       arbitration.       Therefore,    the

district court did not abuse its discretion by denying Marmo’s

motion to lift stay and reinstate the case to the active docket

after having already concluded that patent infringement was a

matter that should have been presented at arbitration.

              Accordingly,     we     affirm      the   district    court’s     order

denying with prejudice Marmo’s motion to lift stay and reinstate

the case to the active docket.                  We dispense with oral argument

because the facts and legal contentions are adequately presented

in the materials before this court and argument would not aid in

the decisional process.

                                                                          AFFIRMED

                                            8