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Fleming v. Brown

United States District Court, D. Nevada

January 22, 2018

RICHARD M. FLEMING, an individual, Plaintiff,
v.
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

         I. SUMMARY

         Before 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).[1] For the reasons discussed below, Brown's Motion is granted.

         II. BACKGROUND

         Fleming 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.)

         The 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.)

         The 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).

         Both 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.)

         III. LEGAL STANDARD

         “The 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)).

         IV. DISCUSSION

         The 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.

         V. CONCLUSION

         The 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 ...


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