Opinion
02 CIV. 10037 (DLC).
June 21, 2004
Kerry L. Konrad, Jennifer R. Rackoff, Mariya S. Treisman, Simpson Thatcher Bartlett LLP, New York, New York, for Plaintiff.
Steven M. Pesner, Mitchell P. Hurley, Rachel H. Lasky, Akin Gump Strauss Hauer Feld, LLP, New York, New York, and Gary S. Raskin, Scott J. Tepper, Garfield Tepper Raskin, Los Angeles, CA, for Defendant Western International Syndication.
OPINION AND ORDER
Apollo Theater Foundation, Inc. ("Apollo") filed this action on December 19, 2002, alleging that the production and distribution of an urban-oriented variety show entitled "Showtime in Harlem" or "Showtime" by Western International Syndication ("Western") and Inner City Theater Group ("ICTG") (collectively, "Defendants") infringed Apollo's rights in the federally-registered trademark IT'S SHOWTIME AT THE APOLLO. The present motion by Western to dismiss or stay Apollo's claims in favor of arbitration was filed on January 20, 2004. Western previously represented to this Court that it wished for all of the claims in this action to be resolved in litigation. For the reasons that follow, Western's motion to dismiss or stay is denied.
Background
On March 7, 2003, Western answered the complaint in this action and filed a counterclaim for declaratory judgment alleging,inter alia, that it obtained certain rights to the use of the trademark APOLLO under a 1998 license agreement. Western's answer did not include an affirmative defense of arbitrability. At an initial pre-trial conference on March 14, discovery and motion practice were scheduled. On March 21, Apollo moved to dismiss or stay Defendants' counterclaims pursuant to the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1-14, (the "Apollo Motion") on the ground that the counterclaims require the interpretation of three agreements containing binding arbitration clauses: a 1992 Asset Purchase Agreement between Apollo and ICTG's predecessor ("1992 Agreement"); the 1998 license agreement between Apollo, ICTG and Western; and a 1999 renewal license agreement between the same parties.
Defendant ICTG filed its answer on March 6, 2003. ICTG agreed on December 7, 2003, to enter into a proposed stipulation with Apollo to resolve this action by arbitration. ICTG does not join Western in bringing this motion.
Western opposed the Apollo Motion, arguing primarily that Apollo waived its right to pursue arbitration when it sought to litigate its own arbitrable claims. Western represented that it "would gladly keep the parties' disputes before this Court, and did not seek to have Plaintiff's claims dismissed in favor of arbitration at the outset of this case." In the alternative, Western moved to dismiss Apollo's claims in favor of arbitration (the "Alternative Motion"), but emphasized that "Western's primary contention . . . is that Plaintiff waived its right to compel arbitration by asserting its claims in this Court in the first instance, and none of the parties' claims should be dismissed. Western asks the Court to dismiss Plaintiff's claims only if the Court rejects Western's waiver argument." (Emphasis in original.)
While the Apollo Motion was pending, the parties proceeded with fact discovery, which was to be completed by September 5. As of August 1, the parties had produced approximately 12,000 pages of documents — of which over 9,000 were produced by Apollo. Several third parties had also been subpoenaed and produced related documents. In addition, the parties engaged in a series of settlement negotiations under the supervision of Magistrate Judge Michael Dolinger. As a result of discussions with Judge Dolinger in May and July, as well as independent negotiations, Western informed Apollo on August 5 that it was willing to agree in principle to the terms of a proposed settlement. During the month of August, the parties reported on their status weekly to this Court. They were unable to finalize the terms of the settlement and met with Judge Dolinger again in early September.
Apollo also brought a motion for a preliminary injunction on May 21, 2003, but withdrew that motion by letter dated July 18, based on Defendants' representation that they did not intend to distribute a program during the 2003-2004 season incorporating the names "Showtime" or "Apollo."
This Court was thereafter informed that no settlement had been reached at the conference and scheduled a second pretrial conference for September 18. On September 16, the parties reported that the conference would be unnecessary, as significant progress had been made toward settlement. The parties notified the Court at the end of October that they had again failed to finalize the terms of a settlement, and the second pretrial conference was held on November 6. At this conference, Apollo suggested that it would be willing to withdraw its motion to compel arbitration so that the resolution of all claims could proceed exclusively in this Court. Western stated, however, that it now believed all claims should be resolved in arbitration and was therefore unwilling to withdraw its Alternative Motion.
Apollo indicated that it would consent to arbitration provided that the proceedings began within 20 days, the time frame set forth in the 1992 Agreement between Apollo and ICTG, and this Court asked the parties to discuss stipulating to arbitration beginning in January 2004. The parties were instructed that if they were unable to reach a settlement by December 19, 2003, the litigation would proceed and pending motions would be addressed. The parties subsequently met with Judge Dolinger and engaged in additional settlement discussions, focusing principally on the date on which the arbitration would commence. During these discussions Western asserted that it was not a party to the 1992 Agreement and would not agree to arbitration beginning in January. Apollo claims that Western then proposed February 23, 2004 as one potential date to commence arbitration proceedings. Western contends that the February date was one potential date discussed by the parties but argues that Apollo's unwillingness to agree to a date later than February 23 was unreasonable.
Apollo agreed to stipulate to arbitration commencing no later than February 23, 2004, and submitted a proposal to ICTG and Western in December 2003. ICTG agreed to the proposed stipulation on December 7. In a conference call with the Court on December 9, however, Western stated that it would not stipulate to arbitration beginning on that date.
Apollo withdrew its Arbitration Motion on December 18, 2003. Western did not agree to withdraw its Alternative Motion. A December 30 Order deemed Western's Alternative Motion withdrawn as moot since the factual basis for the motion had changed substantially in the intervening months and Western no longer sought to pursue its argument that Apollo had waived its right to compel arbitration. A new schedule was set during a conference call held on December 30, according to which fact discovery was to be completed by February 27, 2004. It was agreed that Western would file a new motion to compel by January 16, 2004. The pending motion was filed on January 20.
The Court has granted an extension of time for the completion of non-party discovery, based on the parties' joint representation that they have been unable to obtain essential materials in the possession of third parties, including one that has recently filed for bankruptcy.
Discussion
Under the FAA, written provisions to arbitrate controversies included in any contract affecting interstate commerce "shall be valid, irrevocable, and enforceable, save upon such grounds as exist under law or equity for the revocation of any contract." 9 U.S.C. § 2. "There is a strong federal policy favoring arbitration as an alternative means of dispute resolution." ACE Capital Re Overseas Ltd. v. Cent. United Life Ins. Co., 307 F.3d 24, 29 (2d Cir. 2002) (citation omitted). "[A]ny doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability." Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983); United States Fire Ins. Co. v. National Gypsum Co., 101 F.3d 813, 816 (2d Cir. 1996).
A party may waive its right to arbitration, however, by expressly indicating that it wishes to resolve its claims before a court. Gilmore v. Shearson/American Express Inc., 811 F.2d 108, 112 (2d Cir. 1987). The withdrawal of a previously-filed motion to compel arbitration of claims raising the same legal and factual issues, for example, may constitute an express waiver.Id.; see also Doctor's Assoc., Inc. v. Distajo, 107 F.3d 126, 133 (2d Cir. 1997). No showing of prejudice to the opposing party is necessary if a litigant has expressly waived its right to arbitration. Gilmore, 811 F.2d at 112. Generally, "a party may not freely take inconsistent positions in a law suit and simply ignore the effects of a prior filed document." Id. at 113. This policy against permitting a party to "play fast and loose with the courts" by asserting inconsistent positions concerning its intent to pursue arbitration is necessary to prevent delay and ensure the integrity of the judicial process.Id. (citation omitted); see also Smith v. Petrou, 705 F. Supp. 183, 185 (S.D.N.Y. 1987).
Even absent an express waiver, a party may impliedly waive its right to enforce a contractual arbitration clause by engaging in protracted litigation that prejudices the opposing party. In re Crysen/Montenay Energy Co., 226 F.3d 160, 162 (2d Cir. 2000);PPG Industries, Inc. v. Webster Auto Parts Inc., 128 F.3d 103, 107-08 (2d Cir. 1997). In this context, prejudice refers "to the inherent unfairness — in terms of delay, expense, or damage to a party's legal position — the occurs when the party's opponent forces it to litigate an issue and later seeks to arbitrate that same issue." In re Crysen, 226 F.3d at 162-63 (citation omitted). There is no bright-line rule for determining when a party has waived its right to arbitration, and a court must conduct a fact-specific inquiry. Id. at 163. Factors to be considered include "(1) the time elapsed from the commencement of litigation to the request for arbitration, (2) the amount of litigation (including any substantive motions and discovery), and (3) proof of prejudice." Id. (citation omitted).
Western expressly waived its right to arbitration by explicitly representing to this Court that it wished to resolve all claims in this forum. In its opposition to the Apollo Motion, Western took the position that Apollo had waived its right to arbitration and that none of the parties' claims should be dismissed, explicitly stating that it "would gladly keep the parties' disputes before this Court." In its reply brief on the Alternative Motion, Western further emphasized that its primary contention was that this litigation should proceed and that Western's request for arbitration was to be considered only in the event that Apollo was not found to have waived its right to arbitration. Western's stance against arbitration was explicitly and repeatedly presented to this Court and was no doubt based upon careful evaluation of its legal strategy in this action.
Western's statement to this Court on November 6, 2003 that it believed all of the claims in this action should be arbitrated and that it did not consent to proceed with litigation is squarely inconsistent with the position it took in opposition to the Apollo Motion. The fact that Western included an alternative argument requesting arbitration does nothing to eliminate this inconsistency, as Western made clear that it would prefer to resolve its claims before this Court. The Court was notified of Western's contention that all claims should be subject to arbitration only after Apollo indicated its willingness to agree to Western's previous request that litigation proceed in this Court. Western may not freely adopt inconsistent positions in this action, delaying the ultimate resolution of Apollo's claim.
Having found that Western expressly waived its right to arbitration in its opposition to the Apollo Motion, there is no need to reach Apollo's argument that Western again expressly waived its right to arbitration when it declined to enter into a stipulation to arbitration beginning in either January or February 2004. It is worth noting, however, that after Western changed its position on arbitration from that previously presented to the Court, it had the opportunity to stipulate to arbitration on a time frame discussed by the parties and beginning one month later than that suggested by this Court at the November 6 conference.
It is similarly unnecessary to determine whether Western impliedly waived its right to arbitration given that there is no ambiguity concerning its express waiver. Were an inquiry into an implied waiver by Western required, however, there is ample evidence to support such a finding. Western did not argue that this matter should be resolved in arbitration rather than litigation until almost a full year after the filing of the complaint. It did so, moreover, when Apollo agreed to comply with Western's previous request that all claims be decided by this Court. During the period before Western reversed its position, the parties engaged in extensive discovery, with Apollo producing over 9,000 documents. The parties met with Magistrate Judge Dolinger on four occasions, reported on their status to this Court throughout the Fall, and engaged in numerous settlement negotiations. Apollo has incurred unnecessary delay and expense in the resolution of its claims as a result of Western's late and inconsistent assertion that this matter should be resolved through arbitration.
Conclusion
For the reasons stated above, Western's motion to dismiss or stay Apollo's claims in favor of arbitration is denied.
SO ORDERED.