In late 1996, plaintiff Norcom Electronics Corporation
("Norcom") and defendant CIM S.p.A. entered into a distributor
agreement (hereafter, the "Distributor Agreement," or the
"Agreement") pursuant to which Norcom was to be the exclusive
distributor, throughout most of North America, of machines and
supplies manufactured by CIM S.p.A. for use in embossing plastic
cards and metal plates. After relations between these parties
disintegrated and the agreement expired, Norcom brought this
action against CIM S.p.A. and its subsidiary CIM USA Inc.
(collectively, "CIM"), alleging tortious interference with
Norcom's contractual relations with its dealers and customers,
violations of the Lanham Act and the New York General Business
Law, and a number of common law claims.
Subsequently, CIM moved to compel arbitration of these claims
and to stay litigation pending the arbitration, and Norcom
cross-moved for a preliminary injunction requiring specific
performance of certain duties and obligations pursuant to the
Distributor Agreement pending a resolution of the merits. For the
reasons set forth below, CIM's motion to compel arbitration is
granted in part and denied in part, CIM's motion for a stay is
granted in full, and Norcom's motion for a preliminary injunction
is granted in part and denied in part.
Since 1988, Norcom Electronics Corporation has been engaged in
the business of designing, marketing, selling, and distributing
plastic card and metal plate embossing machines throughout the
United States and elsewhere. CIM S.p.A. is an Italian company
engaged in the business of manufacturing and distributing
embossing machines throughout the world, and CIM USA, Inc. is a
subsidiary of CIM S.p.A. Plastic card embossing machines are
widely used in the hospital industry for creating patient
identification tags, while metal embossing machines are commonly
used in the automotive industry and the military for producing
license plates and dog tags, respectively.
On or about December 31, 1996, Norcom and CIM S.p.A. entered
into a Distributor Agreement that designated Norcom as the
exclusive distributor throughout the United States and most of
North America of embossing products manufactured by CIM S.p.A.
See Aff. of W. Bruce Hansen Ex. B (the Agreement). The initial
term of the Agreement was two years, with automatic renewal for
additional terms of one year, absent notice of termination from
one of the parties at least 180 days before the end of the
current term. See id. at 2, ¶ 3.1. In June 1998, CIM S.p.A.
notified Norcom of its intent to terminate the Agreement and to
negotiate a new relationship between the parties, including the
possible acquisition of Norcom's business. Those negotiations
were unsuccessful, however, and the Agreement terminated on
February 28, 1999.
Eight months later, Norcom brought this action against CIM
S.p.A. and CIM USA Inc., alleging that these defendants engaged
in an illegal course of conduct designed to frustrate Norcom's
its own business and to permit defendants to usurp Norcom's role
in the embossing machine market. These allegations are set forth
in the following eight causes of action, each of which is
asserted to implicate compensatory damages of not less than $5
(1) tortious interference with Norcom's contractual
relations with dealers and end-users of the embossing
(2) false designation of origin and description,
through illegal use of Norcom's trademark, in
violation of the Lanham Act, 15 U.S.C. § 1125(a);
(3) dilution of Norcom's "famous" trademark in
violation of the Lanham Act, 15 U.S.C. § 1125(c);
(4) deceptive acts and practices in violation of New
York General Business Law § 349;
(5) violation of New York General Business Law §
(6) unfair competition in violation of New York
(7) conspiracy in violation of New York common law;
(8) breach of contract in violation of New York
Prior to discovery, CIM moved to compel arbitration and to stay
this action pending arbitration. Norcom then cross-moved for
preliminary injunctive relief requiring CIM to perform certain
duties and obligations pursuant to the Distributor Agreement.
I. CIM's motion to compel arbitration and to stay litigation
The Federal Arbitration Act ("FAA") provides that "an agreement
in writing to submit to arbitration an existing controversy . . .
shall be valid, irrevocable, and enforceable, save upon such
grounds as exist at law or in equity for the revocation of any
contract." 9 U.S.C. § 2. Since the passage of the FAA federal
courts have recognized a "strong federal policy favoring
alternative means of dispute resolution," Oldroyd v. Elmira Sav.
Bank. FSB, 134 F.3d 72, 76 (2d Cir. 1998), and, in light of that
policy, "[a]ny doubts concerning the scope of arbitrable issues
should be resolved in favor of arbitration," Moses H. Cone Mem'l
Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25, 103 S.Ct.
927, 941, 74 L.Ed.2d 765 (1983); accord Ahing v. Lehman Bros.,
Inc., 1997 WL 634290, at *1 (S.D.N.Y. Oct. 14, 1997). "This
`emphatic federal policy in favor of arbitral dispute resolution'
`applies with special force in the field of international
commerce.'" Genesco, Inc. v. T. Kakiuchi & Co., 815 F.2d 840,
847 (2d Cir. 1987) (quoting Mitsubishi Motors Corp. v. Soler
Chrysler-Plymouth, Inc., 473 U.S. 614, 630-34, 105 S.Ct. 3346,
3356-57, 87 L.Ed.2d 444 (1985)).
Four factors must be considered in determining whether to
compel arbitration pursuant to the FAA: first, did the parties
agree to arbitrate; second, what is the scope of the arbitration
agreement; third, did Congress intend the federal statutory
claims asserted by the plaintiff to be nonarbitrable; and fourth,
if only certain of the claims are arbitrable, should the court
stay the balance of the proceedings pending arbitration. See
id. at 844; see generally Arakawa v. Japan Network Group,
56 F. Supp.2d 349, 352 (S.D.N.Y. 1999).
A. Existence of an agreement to arbitrate
There is no dispute that Norcom and CIM S.p.A. agreed to
arbitrate. In pertinent part, Article 22.7 of the Distributor
Agreement provides as follows:
Any controversy or claim arising out of or relating
to this Agreement or breach thereof, shall be settled
by arbitration in accordance with the CONCILIATION
and ARBITRATION rules of the INTERNATIONAL CHAMBER OF
COMMERCE OF ZURICH, SWITZERLAND, without recourse to
the ordinary Courts, by one or more arbitrators
appointed according to the said rules, whose judgment
shall be binding.
Aff. of Hansen Ex. B at 15, ¶ 22.7 (emphasis in
Norcom contends that this arbitration clause is not binding
with respect to its disputes with CIM USA Inc., which was not a
signatory to the Agreement and, in fact, was incorporated only
after CIM S.p.A. and Norcom entered into it. However, the U.S.
Court of Appeals for the Second Circuit and other circuits "`have
been willing to estop a signatory from avoiding arbitration with
a nonsignatory when the issues the nonsignatory is seeking to
resolve in arbitration are intertwined with the agreement that
the estopped party has signed.'" Smith/Enron Cogeneration Ltd.
Partnership v. Smith Cogeneration Int'l, Inc.,