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INTERNATIONAL TALENT GROUP v. COPYRIGHT MGMT.

March 3, 1986

INTERNATIONAL TALENT GROUP, INC., Plaintiff, against COPYRIGHT MANAGEMENT, INC., Defendant


The opinion of the court was delivered by: EDELSTEIN

EDELSTEIN, District Judge:

OPINION AND ORDER

 Defendant has moved to stay this diversity action and to compel arbitration of the claims. Defendant's motion is hereby granted.

 BACKGROUND

 Plaintiff, International Talent Group, Inc. ("ITG") is in business of booking concert tours. Defendant Copyright Management, Inc. ("CMI") is a computer systems consultant. During the latter part of 1983 ITG and CMI discussed the installation of a new computer system at ITG. According to ITG, there were two agreements between ITG and CMI: an oral agreement to provide consulting services on the purchase of computer hardware ("hardware contract") and a written agreement relating to the licensing and design of software ("software contract"). The written "software contract" contains an arbitration clause. *fn1"

 The complaint contains four claims. The first claim alleges a breach of the "hardware contract" by CMI. The second claim alleges fraud by CMI in obtaining the "hardware contract." The third and fourth claims seek rescission of the "software contract" based on CMI's possession of ITG trade secrets.

 Defendant has moved to stay this action and compel arbitration of the four claims based on the arbitration clause in the "software contract."

 DISCUSSION

 SOFTWARE CONTRACT CLAIMS

 Plaintiff seeks to invoke the court's equitable jurisdiction asserting in claims three and four that it is entitled to rescission of the "software contract." The precise basis of these claims is unclear. Plaintiff alleges that defendant is in possession of ITG trade secrets as a result on the contract. Plaintiff also asserts that there has been a substantial, material and willful breach of the software agreement. Plaintiff seeks rescission to place it in the same position it held prior to entering the contract.

 The inclusion of trade secret allegations in the complaint is puzzling. Wayne Forte, president of ITG, asserted that the equitable remedy of rescission is sought to "ensure the safeguarding of our proprietary procedures." Affidavit of Wayne Forte dated January 3, 1986 at P 20. While equity may provide a remedy to prevent the disclosure of trade secrets in the form of an injunction, rescission would not appear to be an appropriate remedy for plaintiff's claims insofar as they involve trade secrets. See Bridge C.A.T. Scan Associates v. Technicare Corp., 710 F.2d 940, 946 (2d Cir. 1983); N.V. Maatschappij Voor Industriele Waarden v. A. O. Smith Corp., 532 F.2d 874, 875 (2d Cir. 1976). See also Timely Products Corp. v. Arron, 523 F.2d 288, 304 (2d Cir. 1975) (damages awarded for unauthorized disclosure of trade secret). Plaintiff has not alleged facts such as the imminent disclosure of confidential information that would warrant the exercise of the court's equitable powers to prevent the dissemination of alleged confidential information.

 If the claim for rescission is based on the breach of the agreement itself, the court's equitable jurisdiction would still not be called upon. Rather, plaintiff may seek rescission "at law" which would be within the scope of the arbitration agreement. Rescission "at law" is appropriate where the plaintiff has been defrauded or for simple contract breach. See D. Dobbs, Handbook on the Law of Remedies § 4.3, at 255 and § 4.8, at 293 & n.6 (1973).

 When viewed in their basic terms, plaintiff's claims regarding the "software contract" are for breach of contract and fraud, see TAC Travel America Corp. v. World Airways, Inc., 443 F. Supp. 825, 828 (S.D.N.Y. 1978) (examination of factual issues presented to determine whether claim labeled as a tort claim was in reality a breach of contract claim and therefore subject to arbitration); the same claims made regarding the "hardware contract" in claims one and two. *fn2" These contract based claims would clearly be within the scope of the ...


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