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SYSCOMM INTL. CORP. v. SYNOPTICS COMMUNS.

June 28, 1994

SYSCOMM INTERNATIONAL CORPORATION, Plaintiff,
v.
SYNOPTICS COMMUNICATIONS, INC., ANIXTER, INC. and WESTCON, INC., Defendants.



The opinion of the court was delivered by: LEONARD D. WEXLER

 WEXLER, District Judge

 Plaintiff Syscomm International Corporation ("Syscomm") brings this action against defendants SynOptics Communications, Inc. ("SynOptics"), Anixter, Inc. ("Anixter") and Westcon, Inc. ("Westcon") for violations of the antitrust laws. Upon commencing this action, Syscomm requested a stay of a certain ongoing arbitration proceeding between Syscomm's assignees and SynOptics. SynOptics opposes the motion and requests that this Court compel arbitration of the antitrust claims against it. For the reasons below, Syscomm's motion for a stay is denied, and SynOptics' request to compel arbitration is granted.

 I. BACKGROUND

 As alleged in the complaint, Syscomm, through a former wholly-owned subsidiary Romel Technology, Inc. ("Romel"), *fn1" was a wholesale distributor of computer products. SynOptics is a manufacturer of computer networking products. Anixter and Westcon sell, install and service computer network systems and related products, and are non-exclusive distributors of SynOptics' products.

 On or about June 11, 1991, Romel and SynOptics entered into a distributor agreement, whereby Romel was appointed a nonexclusive authorized distributor of designated SynOptics' products (the "Agreement"). The Agreement was for a one year term, to renew automatically for a successive one-year period unless terminated by mutual agreement of the parties or in accordance with the terms of the Agreement.

 By letter dated November 3, 1993, SynOptics purported to cancel the Agreement effective February 3, 1994 (the "November 3 Termination Notice"). As of November 4, 1993, Romel's sales of SynOptic's products was about $ 12 million.

 On November 15, 1993, by a Demand for Arbitration (the "Demand"), Romel commenced an arbitration proceeding against SynOptics under the auspices of the American Arbitration Association in San Francisco, California, pursuant to an arbitration clause in the Agreement, *fn2" for "breaches of contract, bad faith termination of the contract, breach of duty of good faith, failure to honor commitment to pay soft dollars, unfair competition, predatory and anti-competitive conduct . . . ." (the "Arbitration Proceeding").

 On or about December 31, 1993, Romel amended its arbitration claim to specify that it sought damages of not less than $ 1,240,095; the original Demand indicated "Claim or Relief Sought: Total monetary damages are unknown at this time." Affidavit of Edward K. Blodnick ("Blodnick Aff.") PP 5-6. In addition, Syscomm agreed to limit its claim against SynOptics to three areas: (1) failure of SynOptics to pay Syscomm certain "soft dollars" earned prior to termination; (2) damages relating to delivery of product to Syscomm in a timely fashion; and (3) inequitable conduct by SynOptics toward Syscomm including, but not limited to, disclosure of Syscomm's customer lists to other distributors, preferential pricing, training and seminars, for which Syscomm sought reinstatement. Blodnick Aff. P 7.

 In the meantime in December 1993, CMS Enhancements, Inc. and CDS Distribution, Inc. (collectively, "CDS") entered into a plan and agreement of merger with Syscomm for Syscomm's wholly-owned subsidiary Romel for certain consideration, including shares of CDS common stock. As Syscomm's President explains further in an affidavit in support of the motion for a stay, as a result of the termination, 100,000 shares of CDS common stock, part of the consideration for the merger, were placed in escrow, conditioned on Syscomm obtaining a reinstatement of the Agreement between Romel and SynOptics. Affidavit of John Spielberger ("Spielberger Aff.") P 5. Subsequently, CDS, as successor to Romel, assigned to Syscomm all of Romel's right, title and interest in any and all claims, including antitrust claims, against SynOptics, Anixter and Westcon.

 Prior to the commencement of this action, the parties exchanged some 6000 pages of documents in the course of the Arbitration Proceeding and completed some four full or partial weeks of hearings, which included 15 days of testimony. In the meantime, by an order dated February 1, 1994, the arbitrator denied a motion by Romel for a preliminary injunction preventing SynOptics, pending the resolution of the Arbitration, from terminating the Agreement on February 3, 1994, pursuant to the November 3 Termination Notice.

 Spielberger states that in testimony during the course of the Arbitration Proceeding, Larry Goodwin ("Goodwin"), formerly Vice President for North America for SynOptics, acknowledged discriminatory practices by SynOptics favoring Anixter and Westcon in regard to certain "key seller programs" and special pricing, purportedly clear violations of the antitrust laws. Spielberger Aff. P 9. Spielberger claims that up until that point, Syscomm suspected that SynOptics may have been violating the antitrust laws by certain discriminatory conduct, "but never had any hardcore proof" until Goodwin's testimony. Id. P 9. Based upon these activities discovered in the Arbitration Proceeding, Syscomm commenced the present action for antitrust violations.

 Upon commencing this action, Syscomm requested a stay of the Arbitration Proceeding. Syscomm contends that it will be prejudiced if it is not permitted to pursue its antitrust claims in this action first, and, in any event, Syscomm may not pursue antitrust claims in arbitration as it violates public policy. Moreover, Syscomm contends that it has no agreement to arbitrate antitrust claims with Anixter and Westcon, and it should have the opportunity to pursue its antitrust claims in one forum, this Court, against all defendants.

 In a conference call with the Court on June 17, 1994, Syscomm's and SynOptics' attorneys agreed that the language of the arbitration clause in the Agreement encompassed Syscomm's antitrust claims against SynOptics. As a result, the attorneys further agreed that it was unnecessary for SynOptics to bring a formal motion to compel arbitration of these claims and SynOptics' opposition to the stay motion would be treated as a motion to compel arbitration of ...


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