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Citing the strong federal policy favoring arbitration, a federal district court in Arizona avoided a “hypertechnical” ruling by treating a motion to dismiss as a motion to compel arbitration.
In Filimex, L.L.C. v. Novoa Investments, L.L.C., No. CV 05-3792-PHX-SMM, 2006 WL 2091661 (D. Ariz. July 17, 2006), Novoa was using a trademark owned by Filimex pursuant to a licensing agreement that provided for arbitration. After the agreement was terminated, Novoa allegedly continued using the trademark.
Filimex sued Novoa, claiming breach of contract and trademark infringement. Novoa moved for dismissal, arguing that the arbitration clause deprived the Court of subject matter jurisdiction.
In opposing the motion, Filimex argued that Novoa should have brought a motion to compel arbitration rather than a motion to dismiss. Rejecting this argument, the Court stated that, “requir[ing] a motion to compel instead of a motion to dismiss would be hypertechnical and undermine the liberal policy favoring arbitration agreements.” citing Choice Hotels International, Inc. v. BSR Tropicana Resort, Inc., 252 F.3d 707 (4th Cir. 2001).
As the Court noted, Filimex knew that Novoa’s motion addressed the arbitrability of the dispute, which gave Filimex an opportunity to respond appropriately. Accordingly, in order to “avoid a hypertechnical ruling that would inevitably lead to duplicative litigation,” the Court treated Novoa’s motion to dismiss as a motion to compel arbitration, and ordered the parties to arbitrate the dispute.
Lastly, the Court addressed the proper venue for arbitration. The parties’ agreement specified Los Angeles as the venue, but under Ninth Circuit precedent, section 4 of the Federal Arbitration Act (“FAA”) would not allow the Court to order arbitration in California, so the Court ordered the parties to arbitrate in Arizona.
Section 4 of the FAA requires arbitration proceedings to “be within the district in which the petition for an order directing such arbitration is filed.” However, section 4 also provides that “the court shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement.” Perhaps Novoa deliberately brought a motion to dismiss rather than a motion to compel arbitration because section 4 would not allow the Court to order arbitration in Los Angeles (i.e., “in accordance with the terms of the agreement”).
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