United States District Court, D. Nevada
RICHARD M. FLEMING, an individual, Plaintiff,
CHAD A. BROWN, an individual, Defendant.
ORDER (PL.'S MOTION TO COMPEL ARBITRATION AND
STAY PROCEEDINGS - ECF NO. 49)
MIRANDA M. DU, UNITED STATES DISTRICT JUDGE
the Court is Defendant Chad A. Brown's Motion to Compel
Arbitration and Stay Proceedings (“Motion”). (ECF
No. 49.) Plaintiff Richard M. Fleming responded (ECF No. 50),
and Brown replied (ECF No. 51). For the reasons discussed below,
Brown's Motion is granted.
and Brown formed a company (“Omnific, LLC” or
“Omnific”) in 2015 to market a breast cancer
screening method that Fleming developed. (ECF No. 49 at 1.)
The parties now dispute whether Brown infringed Fleming's
U.S. Patent No. 9566037 (“Patent”) and copyrights
bearing Registration Nos. TX 7-451-243 and TX 7-451-244
(“Copyrights”) relating to the breast cancer
screening method when Brown allegedly conducted breast
imaging studies using the Patent and Copyrights.
(Id; ECF No. 38 at 5, 6, 8, 11.)
parties executed an operating agreement (“2015
Operating Agreement”) when they formed Omnific.
(See ECF No. 49 at 2; see generally ECF No.
49-2 (2015 Operating Agreement).) The 2015 Operating
Agreement describes the capital contributions both parties
made in exchange for an interest in the company. (ECF No.
49-2 at 10-11.) Fleming's capital contribution consisted
of assigning to Omnific a perpetual license to certain
intellectual property related to the breast cancer screening
method he developed. (Id.) The assignment consisted
of, inter alia, future patents related to
Fleming's breast cancer screening method as well as
scientific advancements by Fleming related to cancer and
cardiovascular screening, diagnosis, monitoring, care and
treatment. (Id.) The 2015 Operating Agreement also
excluded certain intellectual property from the
assignment-published papers, copyrights, and patents as noted
in Fleming's CV. (Id. at 11.)
parties executed a new operating agreement in 2016
(“2016 Operating Agreement”) that was allegedly
intended to adjust their membership interests. (ECF No. 49 at
2.) Brown contends that “it is not at all clear that
the amendment was effective” because, “[a]t some
point in that process, Fleming surreptitiously altered
certain language related to the contribution of certain
intellectual property to Omnific.” (Id.) The
2016 Operating Agreement clearly differs from the 2015
Operating Agreement. While the assignment provision in the
2015 Operating Agreement included future patents related to
Fleming's breast cancer screening method, the assignment
in the latter operating agreement did not. (Compare
ECF No. 49-2 at 10-11 with ECF No. 49-3 at 10-11.)
Nor did the assignment in the 2016 Operating Agreement
include scientific advancements by Fleming related to cancer
and cardiovascular screening, diagnosis, monitoring, care and
treatment. (Id.) The provision of the 2016 Operating
Agreement excluding certain intellectual property also
appears to be substantively different from the corresponding
provision of the 2015 Operating Agreement. Although both
agreements exclude intellectual property and copyrighted
material as noted in Fleming's CV (id.), the
2016 provision excludes “any and all patent rights
owned or held” by Fleming, “subject to the
license granted to” Omnific (ECF No. 49-3 at 11).
the 2015 and 2016 Operating Agreements contain arbitration
clauses. The 2015 Operating Agreement states: “If a
dispute arises out of or relates to this Agreement, or the
breach thereof, and if said dispute cannot be settled through
direct discussions . . . the Members and Manager agree . . .
to start proceedings to settle the dispute in an amicable
manner by mediation . . . before resorting to
arbitration.” (ECF No. 49-2 at 18.) The 2016 Operating
Agreement contains the same language, though it extends the
timeline for resolving the conflict. (See ECF No.
49-3 at 18.)
FAA, 9 U.S.C. § 1 et seq., requires federal
district courts to stay judicial proceedings and compel
arbitration of claims covered by a written and enforceable
arbitration agreement.” Nguyen v. Barnes &
Noble Inc., 763 F.3d 1171, 1175 (9th Cir. 2014) (citing
9 U.S.C. § 3). The FAA limits the district court's
role to determining whether a valid arbitration agreement
exists, and whether the agreement encompasses the disputes at
issue. Id. (citing Chiron Corp. v. Ortho
Diagnostic Sys., Inc., 207 F.3d 11236, 1130 (9th Cir.
2000)). “The Arbitration Act establishes that, as a
matter of federal law, any doubts concerning the scope of
arbitrable issues should be resolved in favor of arbitration
. . . .” Moses H. Cone Mem'l Hosp. v. Mercury
Const. Corp., 460 U.S. 1, 24-25 (1983). Thus,
“[t]he standard for demonstrating arbitrability is not
a high one; in fact, a district court has little discretion
to deny an arbitration motion, since the Act is phrased in
mandatory terms.” Republic of Nicar. v. Std. Fruit
Co., 937 F.2d 469, 475 (9th Cir. 1991). However,
“arbitration is a matter of contract and a party cannot
be required to submit to arbitration any dispute which he has
not agreed so to submit.” AT&T Techs., Inc. v.
Commc'ns Workers of Am., 475 U.S. 643, 648 (1986)
(quoting United Steelworkers of Am. v. Warrior & Gulf
Navigation Co., 363 U.S. 574, 582 (1960)).
parties dispute only whether the arbitration clause in the
operating agreements encompass the claims at issue. The
arbitration agreement applies to all disputes arising out of
or relating to the agreement. (See ECF No. 49-2 at
18; ECF No. 49-3 at 18.) The claims at issue are for
copyright and patent infringement as well as fraud related to
such infringement. (ECF No. 38 at 13-16.) Consequently, the
core dispute between the parties is whether Fleming assigned
to Omnific a perpetual license to the Patent and Copyrights
such that Brown did not infringe when he allegedly conducted
breast imaging studies using the Patent and Copyrights.
(See ECF No. 49 at 6.) Such a dispute arises out of
and relates to the operating agreements. Fleming argues that
the Copyrights and Patent are excluded from the operating
agreements (ECF No. 50 at 2), but his argument concedes the
point. Whether the Copyrights and Patent are excluded from
the operation agreements is a dispute the parties agreed to
settle by arbitration.
Court notes that the parties made several arguments and cited
to several cases not discussed above. The Court has reviewed
these arguments and cases and determines that they do not
warrant discussion as ...