United States District Court, S.D. Texas, Houston Division
Precision-Hayes, International, Inc. Plaintiff,
JDH Pacific, Inc., Defendant.
MEMORANDUM OPINION AND ORDER
H. Miller Senior United States District Judge
before the court are defendant JDH Pacific, Inc.'s
(“JDH”) Motion to Dismiss Pursuant to
Fed.R.Civ.P. 9(c) (Dkt. 2) and Motion to Compel Arbitration
(Dkt. 12). Plaintiff Precision-Hayes, International, Inc.
(“PHI”) responded to both motions. Dkts. 7, 14.
JDH replied. Dkts. 9, 16. Having considered the motions, the
responses, the replies, and applicable law, the court finds
that JDH's Motion to Compel Arbitration should be GRANTED
and JDH's Motion to Dismiss should be DENIED AS MOOT.
case is about agreements between PHI and JDH (the
“Agreements”) governing JDH's rights as a
licensee to “import cast metal anchor plates
manufactured outside the United States for sale into the
construction industries.” Dkt. 1-1 ¶¶ 24, 26,
34. The Agreements purport to grant JDH two exclusive
licenses to PHI's patents and trademarks. Id.
¶¶ 26, 34. On April 15, 2019, PHI terminated the
Agreements. Id. ¶ 25. PHI alleges that JDH
failed to comply with the terms of the Agreements, such as
using the marks in commerce without PHI's consent,
failing to pay royalties, refusing to allow PHI to inspect
relevant books and records, failing to meet specifications,
ignoring requests for samples of anchors, failing to return
PHI's confidential information, and failing to provide a
description of anchor inventory. Id. ¶ 43. PHI
also alleges various violations of PHI's “patents,
trademarks, trade secrets, and/or confidential
filed its original petition in the 400th District Court in
Fort Bend County, Texas, on April 18, 2019. Dkt. 1-1. On May
17, 2019, JDH timely removed the case to this court,
asserting that this court has diversity jurisdiction and
Federal Question jurisdiction over this action. Dkt. 1. On
May 21, 2019, this court ordered an initial pretrial and
scheduling conference and disclosure of interested persons.
Dkt. 3. PHI submitted a joint discovery/case management plan
on June 28, 2019 (Dkt. 11) and filed initial disclosures on
July 23, 2019 (Dkt. 13).
20, 2019, JDH moved to dismiss the case for failure to
satisfy conditions precedent, asserting PHI failed to plead
that PHI “has attempted to ‘amicably settle all
disputes' and only then invoke binding arbitration in
breach of Section 5.10 of the Agreements.” Dkt. 2 at 1.
PHI responded to the Motion to Dismiss. Dkt. 7.
5, 2019, JDH filed a Motion to Compel Arbitration, arguing
that PHI and JDH entered into agreements that required
arbitration of all disputes and that PHI “ignored the
clearly defined agreement of the contracts” when PHI
sued JDH rather than submit the disputes to arbitration. Dkt.
12-1. Section 5.10 of the Agreements recites in pertinent
DISPUTE RESOLUTION/ARBITRATION - The parties hereto will
attempt to amicably resolve settle all disputes,
controversies, or differences arising out of or in relation
to this AGREEMENT by good faith negotiation. If such amicable
settlement cannot be obtained, then any such dispute shall be
submitted to binding arbitration in Dallas, Texas in
accordance with the rules of the American Arbitration
Dkt. 2-4 at 14; Dkt. 2-5 at 7. JDH asserted that the disputes
are arbitrable under the Federal Arbitration Act, that the
parties agreed to arbitrate the disputes in question, and
that no external legal constraints foreclosed arbitration of
the claims. Dkt. 12-1. Moreover, JDH argued that since all
issues were subject to arbitration, dismissal of the case was
whether parties “should be compelled to arbitrate
involves two steps: (1) whether there is a valid agreement to
arbitrate between the parties; and (2) whether the dispute in
question falls within the scope of that arbitration
agreement.” TRC Envtl. Corp. v. LVI Facility
Servs., Inc., 612 Fed.Appx. 759, 761 (5th Cir. 2015).
Whether there is a valid agreement to arbitrate “is
evaluated on the basis of ordinary state-law principles that
govern the formation of contracts.” Id. Under
this framework, “a court may order arbitration of a
particular dispute only where the court is satisfied that the
parties agreed to arbitrate that dispute.” Granite
Rock Co. v. Int'l Bhd. of Teamsters, 561 U.S. 287,
297, 130 S.Ct. 2847 (2010). In determining whether a dispute
falls within the scope of the arbitration agreement, the
court “resolves ambiguities in favor of
arbitration.” Scudiero v. Radio One of Texas II,
L.L.C., 547 Fed.Appx. 429, 430 (5th Cir. 2013).
“Once the court finds that the parties agreed to
arbitrate, it must consider whether any federal statute or
policy renders the claims nonarbitrable.”
Will-Drill Res., Inc. v. Samson Res. Co., 352 F.3d
211, 214 (5th Cir. 2003).
may waive its right to arbitrate if it “substantially
invokes the judicial process to the detriment or prejudice of
the other party.” In re Mirant Corp., 613 F.3d
584, 588 (5th Cir. 2010). Invocation of the judicial process
involves engaging “in some overt act in court that
evinces a desire to resolve the arbitrable dispute through
litigation rather than arbitration.” Subway Equip.
Leasing Corp. v. Forte, 169 F.3d 324, 329 (5th Cir.
1999). Waiver is determined under the facts of each case.
In re Mirant Corp., 613 F.3d at 589. The party
claiming waiver has a “heavy burden” because
“[t]here is a strong presumption against finding a
waiver of arbitration.” Republic Ins. Co. v. PAICO
Receivables, LLC, 383 F.3d 341, 344 (5th Cir. 2004).
3 of the Federal Arbitration Act provides that when claims
are properly referable to arbitration, the court shall stay
the trial of the action until the arbitration is complete. 9
U.S.C. § 3. The court “may not deny a stay”
upon a showing that “the opposing party has commenced
suit upon any issue referable to arbitration under an
agreement in writing for such arbitration.” Alford
v. Dean Witter Reynolds, Inc., 975 F.2d 1161, 1164 (5th
Cir. 1992). However, “when all of the issues
raised in the district court must be submitted to
arbitration, ” then the case can be dismissed.
Id. (emphasis in original).