John DeRosa v. J. P. Walsh & J. L. Marmo Enterprises

UNPUBLISHED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Affirmed by unpublished per curiam opinion.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Unpublished opinions are not binding precedent in this circuit.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.
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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.
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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
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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.
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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
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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
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