Aetrex Worldwide Inc v. Sourcing For You Limited , 555 F. App'x 153 ( 2014 )

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
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No. 13-3933
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AETREX WORLDWIDE, INC.,
v.
SOURCING FOR YOU LIMITED;
SOURCING FOR YOU CONSULTING, LTD.,
Appellants
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Appeal from the United States District Court
for the District of New Jersey
(D.C. Civil Action No. 2-13-cv-01943)
District Judge: Honorable Dennis M. Cavanaugh
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Submitted Under Third Circuit LAR 34.1(a)
January 13, 2014
Before: AMBRO, HARDIMAN, and GREENAWAY, Jr., Circuit Judges
(Filed: January 23, 2014)
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OPINION
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AMBRO, Circuit Judge
Plaintiff Aetrex Worldwide, Inc. (“Aetrex”) and defendants Sourcing for You,
Limited and Sourcing for You Consulting, Ltd. (collectively, “Sourcing for You”)
entered into a supply agreement containing a non-compete provision in March 2008. This
agreement also contained a clause agreeing to arbitrate contractual disputes as follows,
with an exception for certain actions involving injunctive relief:
Except for an action seeking a temporary restraining order or injunction
related to the purposes of this Agreement, a suit to compel compliance
with this dispute resolution process, or the entry and enforcement of any
judgment on any arbitration award, any dispute, claim or controversy
arising out of relating to this Agreement or the breach, termination,
enforcement, interpretation or validity thereof, including the
determination of the scope or applicability of this Agreement to arbitrate,
shall be determined exclusively by final, binding arbitration to be held in
a mutually convenient location within the USA.
App. at 59 (emphasis added). Aetrex filed a complaint based on Sourcing for You’s
alleged breach of the non-compete provision in March 2013, requesting “temporary,
preliminary, and permanent injunctive relief.” Complaint at 18-19. Sourcing for You filed
a motion to stay the proceeding and compel arbitration, which the District Court denied
based on the specified exception. In April 2013, after the District Court denied its request
for a temporary restraining order, Aetrex withdrew its motion for a preliminary
injunction. Sourcing for You again moved to stay the proceeding and compel arbitration
in May 2013. The Court denied the motion and Sourcing for You appeals. We affirm.
The District Court had jurisdiction under 28 U.S.C. § 1332.1 We have appellate
jurisdiction under 9 U.S.C. § 16(a)(1). “Since this appeal presents a legal question
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In its “Jurisdictional Statement,” Sourcing for You’s brief argues that the District Court
lacked subject matter jurisdiction because, although it concedes that the parties are
diverse, it contends the amount in controversy does not exceed $75,000. Sourcing for
You’s Br. at 1. In particular, it argues that because Aetrex cannot restrain the Chinese
manufacturers with whom Sourcing for You contracts, the injunction has a value of $0.
Id. This argument is based entirely on one-sided speculation. In any case, Sourcing for
You has not established that it is “a legal certainty that the claim is really for less than the
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concerning the applicability and scope of an arbitration agreement, our standard of
review is plenary.” Harris v. Green Tree Fin. Corp., 183 F.3d 173, 176 (3d Cir. 1999)
(citing Pritzker v. Merrill Lynch, 7 F.3d 1110, 1113 (3d Cir. 1993)).
“[B]efore compelling arbitration pursuant to the Federal Arbitration Act, a court
must determine that (1) a valid agreement to arbitrate exists, and (2) the particular dispute
falls within the scope of that agreement.” Kirleis v. Dickie, McCamey & Chilcote, P.C.,
560 F.3d 156, 160 (3d Cir. 2009) (citations omitted). Here, both sides agree that the
arbitration clause generally created a valid agreement to arbitrate, but disagree as to
whether this dispute is within the scope of that agreement.
Sourcing for You argues that the arbitration agreement unambiguously requires
arbitration here. In its view, the phrase “[e]xcept for an action seeking a temporary
restraining order or injunction related to the purposes of this Agreement” excludes only
requests for temporary restraining orders or temporary injunctions, not requests for
permanent injunctions, because the word “temporary” should be read to modify both
“restraining order” and “injunction.” Aetrex counter-argues that the agreement to
arbitrate unambiguously excepts the request for a permanent injunction, because actions
seeking an “injunction” are not covered by the arbitration agreement. The District Court
sided with Aetrex, terming Sourcing for You’s modifier argument as “unreasonable” and
concluding that the exception “unambiguously covers permanent injunctions.” Op. at 3-4.
jurisdictional amount,” as would be necessary to require dismissal here. St. Paul Mercury
Indem. Co. v. Red Cab Co., 303 U.S. 283, 289 (1938). Thus, jurisdiction was proper.
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Aetrex has the better of the argument. As the District Court concluded, it is both
more intuitive and more consistent with ordinary usage to read “temporary restraining
order” as an idiomatic phrase, meaning that the clause excepts both suits for temporary
restraining orders and suits for injunctions (of all kinds). Because the plain meaning of
the contract’s language is clear, the provision is not ambiguous. Neither Sourcing for
You’s grammatical arguments, nor the tangentially related cases from outside our Court
that Sourcing for You cites supporting these arguments, compel an alternative
conclusion.
Sourcing for You additionally points to cases where courts have allowed motions
for temporary or preliminary injunctions even though the parties have agreed to arbitrate
all disputes. See, e.g., Ortho Pharm Corp. v. Amgen, Inc., 882 F.2d 806, 812 (3d Cir.
1989). These cases actually undermine Sourcing for You’s argument. If, as our precedent
in Ortho suggests, preliminary injunctions necessary to preserve the status quo pending
arbitration are available even without an explicit exception to the arbitration agreement, a
contractual provision excepting only temporary injunctions (and temporary restraining
orders) would be superfluous, thus strongly implying that the parties instead intended to
except injunctions of all kinds.
In the alternative, Sourcing for You argues that, if the agreement were considered
ambiguous, an arbitration panel, rather than the District Court, ought to have decided
whether this action is within the scope of the arbitration agreement. The arbitration
clause includes an agreement to submit to binding arbitration “the determination of the
scope or applicability of this Agreement to arbitrate[.]” App. at 59. Because, as we
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conclude above, the contractual provision was not ambiguous, there was no meaningful
question to refer to the arbiter concerning the scope of the agreement. Indeed, even were
we to conclude that there is some ambiguity in the provision, it does not necessarily
follow that the ambiguity must be resolved through arbitration. See Local 827, Int’l Bhd.
of Elec. Workers v. Verizon N.J., Inc., 458 F.3d 305, 312 (3d Cir. 2006) (“Insofar as the
existence of contrary interpretations of the arbitration clause suggests that there may be a
modicum of ambiguity in the language of the arbitration clause, we note that a
compelling case for nonarbitrability should not be trumped by a flicker of interpretive
doubt.” (quoting PaineWebber Inc. v. Hofmann, 984 F.2d 1372, 1377 (3d Cir. 1993))
(internal quotation marks omitted)).
Because the District Court correctly held that the arbitration clause unambiguously
excepted requests for permanent injunctions, it did not err in denying Sourcing for You’s
motion to stay the proceedings and compel arbitration.2 We thus affirm.
2
Sourcing for You previously moved to stay the proceedings at the District Court
pending this appeal under the theory that the District Court lacked jurisdiction to
determine that the appeal is frivolous. In November 2013, our Court denied this motion
without prejudice. It is unclear whether this challenge is properly before us, but, in any
event, given our resolution of the underlying appeal, the question is now moot. We make
no decision as to the substantive question of law.
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