United States District Court, E.D. Texas, Sherman Division
NORTH AMERICAN DEER REGISTRY, INC.
DNA SOLUTIONS, INC.
MEMORANDUM OPINION AND ORDER
L. MAZZANT, UNITED STATES DISTRICT JUDGE
before the Court are Defendant DNA Solutions, Inc.'s
Motion to Dismiss Amended Complaint and Compel Arbitration,
or in the Alternative, to Transfer Venue to the Western
District of Oklahoma (Dkt. #19) and Motion to Stay (Dkt.
#31). After reviewing the relevant pleadings, motion, and
arguments of counsel, the Court finds the motions should be
2007, North American Deer Registry, Inc. (“Deer
Registry”) engaged DNA Solutions, Inc.
(“DNAS”) to process deer genetic information,
perform matching services, and host a database for Deer
Registry's information, which would be accessible online.
As part of the agreement, DNAS agreed to preserve the
confidentiality of Deer Registry's information and to
return such information upon termination of DNAS's
2013, the parties entered into a revised agreement for DNAS
to maintain a registry of information for Deer Registry. The
parties entered into a similar agreement in 2014 (the
“Contract”). Deer Registry terminated the
Contract effective January 1, 2017.
the Contract, Deer Registry retained ownership of all
biological materials, genetic information, genotype analysis
data, membership directory, and any other information
provided by Deer Registry. DNAS, on the other hand, retained
ownership of any code that it created as a result of running
the registry. DNAS agreed to keep confidential the content of
the registry or any other information it received from Deer
Registry in the performance of the Contract or in its prior
dealings with Deer Registry. DNAS further agreed that, upon
termination of the Contract, it would return all information
provided by Deer Registry.
January 27, 2017, Deer Registry filed a complaint, alleging
unfair competition under the Lanham Act, misappropriation of
trade secrets, constructive trust, unjust enrichment, and
requesting injunctive relief (Dkt. #1). The same day, Deer
Registry made a demand for arbitration seeking relief for
breach of contract, temporary and permanent injunctions,
declaratory judgment, and attorneys' fees (Dkt. #19,
Exhibit 2). On February 22, 2017, Deer Registry filed an
amended complaint (Dkt. #14). On March 8, 2017, DNAS filed
this motion to dismiss (Dkt. #19). On March 22, 2017, Deer
Registry filed a response (Dkt. #25). On March 29, 2017, DNAS
filed a reply (Dkt. #29). On March 31, 2017, while the motion
to dismiss was still pending, DNAS filed a motion to stay
pending arbitration (Dkt. #31). On April 5, 2017, Deer
Registry filed a sur-reply to the motion to dismiss (Dkt.
#33). On April 14, 2017, Deer Registry filed a response to
the motion to stay (Dkt. #34).
April 27, 2017, the Court held a hearing on the parties'
arguments regarding the arbitration provision (Dkt. #37). At
the hearing, the Court ordered the parties to submit
supplemental briefing regarding each cause of action, in the
event that the Court finds the arbitration provision is
narrow (Dkt. #37). On May 1, 2017, both parties submitted
supplemental briefs (Dkt. #39; Dkt. #41).
Federal Arbitration Act (“FAA”) expresses a
strong national policy favoring arbitration of disputes, and
all doubts concerning the arbitrability of claims should be
resolved in favor of arbitration.” Wash. Mut. Fin.
Grp., LLC v. Bailey, 364 F.3d 260, 263 (5th Cir. 2004).
The FAA, “leaves no place for the exercise of
discretion by a district court, but instead mandates that
district courts shall direct the parties to proceed to
arbitration on issues as to which an arbitration agreement
has been signed.” Dean Witter Reynolds, Inc. v.
Byrd, 470 U.S. 213, 218 (1985).
considering a motion to compel arbitration, the Court must
address two questions. Graves v. BP Am., Inc., 568
F.3d 221, 222 (5th Cir. 2009) (citing Fleetwood Enters.
Inc. v. Gaskamp, 280 F.3d 1069, 1073 (5th Cir. 2002)).
“First, whether there is a valid agreement to
arbitrate, and second, whether the dispute in question falls
within the scope of the arbitration agreement.”
Id. Concerning the first question of contract
validity, the Court should apply “ordinary state-law
principles that govern the formation of contracts.”
Id. at 222 (citing First Options of Chi., Inc.
v. Kaplan, 514 U.S. 938, 944 (1995)). The second
question of scope is answered “by applying the
‘federal substantive law of arbitrability.'”
Id. (quoting Mitsubishi Motors Corp. v. Soler
Chrysler-Plymouth, Inc., 473 U.S. 614, 626 (1985)).
Courts construe any ambiguities as to the scope of an
arbitration clause in favor of arbitration. See Fleetwood
Enters., 280 F.3d at 1073. “[A]rbitration should
not be denied ‘unless it can be said with positive
assurance that an arbitration clause is not susceptible of an
interpretation which would cover the dispute at
issue.'” Neal v. Hardee's Food Sys.,
Inc., 918 F.2d 34, 37 (5th Cir. 1990) (quoting
Commerce Park at DFW Freeport v. Mardian Constr.
Co., 729 F.2d 334, 338 (5th Cir. 1984)).
parties do not dispute that there is a valid arbitration
agreement that covers disputes concerning interpretation of
the Contract. The only dispute is whether Deer Registry's
claims in this Court come within the scope of the arbitration
initial matter, DNAS makes a passing reference to the choice
of law provision of the Contract to state that Oklahoma law
and the Oklahoma Uniform Arbitration Act should apply to this
case. However, DNAS then admits that there is no conflict
between Oklahoma law and the FAA. Therefore, the Court will
apply federal arbitration law to determine the scope of the
arbitration clause, in accordance with the FAA. Graves,
568 F.3d at 223.
arbitration provision states:
20. Dispute Resolution. In the event a dispute
arises concerning the interpretation of the terms of this
Agreement, the parties agree that such dispute shall be
submitted to binding arbitration pursuant to the Commercial
Rules of the American Arbitration Association. In the event
of such arbitration, the prevailing party shall be entitled
to recover all reasonable and necessary attorneys' fees,
arbitration fees, and all other expenses related to the
arbitration action. The arbitration shall be held in Oklahoma
City, Oklahoma County, State of Oklahoma.
(Dkt. #19, Exhibit 2 at p. 23). DNAS argues the Court should
dismiss the case in favor of arbitration because all of Deer
Registry's claims involve interpretation of the Contract
and thus fall within the scope of the arbitration provision.
Deer Registry responds that it complied with the arbitration
clause by demanding arbitration for breach of contract and
declaratory judgment claims and by filing the rest of its
claims in the district court.
Registry made a demand for arbitration on claims for breach
of contract, declaratory judgment, and injunctive relief.
Specifically, Deer Registry seeks declaratory judgment for:
a. [O]wnership of specific rights to data
b. [C]ompliance with confidentiality provisions.
c. What is described by the phrase, “Any information
developed by DNAS (the “DNAS Data”) incidentally
through the performance of its services hereunder that
analyze or organize the collective database (as distinct from
the original NADR Information) shall not be considered member
or NADR Information and such information shall be solely the
property of DNAS.”
d. The extent, if any, of “DNAS's exclusive
continued ownership of the rights to the Data (as defined in
the Agreement) obtained and the Database (as defined in the