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Finding that arbitrable issues were "at the heart of the dispute," a federal court in Minnesota stayed a party's request for injunctive relief pending the outcome of arbitration.
In Eco Water Systems, LLC v. KRIS, Inc., No. 06-3105, 2007 WL 1321851 (D. Minn. May 4, 2007), KRIS was the exclusive dealer of Eco Water Systems (Eco) products in central Kansas. KRIS allegedly violated a dealer agreement (the Agreement), prompting Eco to terminate the Agreement.
When KRIS failed to comply with post-termination obligations regarding the use of Eco's name and trademarks, Eco sued for an injunction. Under the terms of the Agreement, Eco retained the right to sue for an injunction, but nearly every other issue was subject to arbitration.
The question for the Court was whether to rule on the request for injunctive relief or stay further proceedings in favor of arbitration. In issuing a stay, the Court first determined that the Agreement lacked the necessary "qualifying language" which would have allowed the Court to rule on the injunction without deciding the merits of underlying arbitrable issues.
The Court further noted that when parties have agreed to arbitrate some – but not all – disputes between them, it is appropriate to stay the non-arbitrable issues when one of two conditions are met: (1) the arbitrable claims predominate; or (2) where the outcome of the non-arbitrable claims will depend on the arbitrator's decision.
The Court found that both conditions were met. Given the breadth of the arbitration clause, the arbitrable claims predominated. Also, since a ruling on the request for injunctive relief would "wholly depend" on the decisions made by the arbitrator, it was proper to issue a stay.
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