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ADR/JB, CORP. v. MCY III

January 23, 2004.

ADR/JB, CORP., Plaintiff, — against — MCY III, INC., d/b/a MOTOR LIFE DISTRIBUTORS, Defendant


The opinion of the court was delivered by: ARTHUR SPATT, District Judge

MEMORANDUM OF DECISION AND ORDER

On May 16, 2003, ADR/JB, Corp. ("ADR" or the "plaintiff") commenced this action against MCY III, Inc. ("MCY" or the "defendant"), asserting four claims sounding in breach of contract. In response, MCY brings this motion to compel arbitration pursuant to the Federal Arbitration Act, 9 U.S.C. § 1 et seq. (the "Act"). Page 2

  I. BACKGROUND

  MCY is the exclusive American manufacturer and distributor of automotive service equipment and chemicals marketed as the "Bilstein Engine Flush." ADR is in the business of selling automotive parts, oil additives, filters and lubricants, as well as servicing transmissions, power steering, radiator and engine flush machines.

 A. The Jobber Agreement

  On March 8, 2001, MCY entered into a jobber agreement (the "Jobber Agreement") with ADR. Pursuant to this agreement, MCY granted ADR the exclusive right to market, distribute, sell and service the Bilstein Engine Flush Systems. The products covered by the Jobber Agreement included the Bilstein R-2000 Single Tank and Double Tank Flush Systems and "Forty Pack's" of chemicals, filters and related supplies (collectively, the "Bilstein Products"). The Jobber Agreement precluded ADR from selling Bilstein Products to any national accounts. Section 2(a) of the Jobber Agreement states, in relevant part:
During the term of this Agreement the Distributor [MCY] hereby grants to the Jobber [ADR] and the Jobber hereby accepts the exclusive right within the Jobber's Territory to market, distribute, sell and service the Included Products, with the exception of Sonic Group, Group 1, and Asburry Group stores. MotorLife reserves the right to service and sell direct national accounts such as Midas and Jiffy Lube. . . .
ADR's "Territory" consisted of the states of New York, New Jersey, Connecticut, and Page 3 the City of Boston, Massachusetts. Under Section 3 of the Jobber Agreement, ADR agreed "to confine sale efforts for the Included Products to the Jobber's Territory" and not to "directly or indirectly, make any sales of Included Products outside the Jobber's Territory, unless it has received the written permission of the Distributor to engage in sales efforts outside the Jobber's Territory."

  The term of the Jobber Agreement was initially for one year beginning April 17, 2001 and ending April 16, 2002. The agreement automatically renews itself for successive one year periods unless at least 90 days prior to the expiration of the one year term MCY or ADR gives notice in writing of its desire to terminate the agreement.

  The parties agreed to arbitrate any disputes involving the Jobber Agreement. An arbitration clause in Section 16 of the Jobber Agreement states:
Any controversy or claim arising out of or relating to this Agreement or breach hereof, shall be settled by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association. . . . This Agreement shall be governed by the law of the State of California without regard to any otherwise applicable principles of conflicts of law.
B. The Pep Boys Agreement

  Shortly after the parties entered into the Jobber Agreement, ADR began negotiations with representatives of Pep Boys, an automotive parts and repair chain with at least 635 stores located throughout the country and with headquarters in Page 4 Philadelphia, Pennsylvania. The plaintiff approached MCY with idea of getting Pep Boys as a customer. However, because Pep Boys was a national account, ADR claims that the parties discussed the prospect of entering into a new agreement concerning Pep Boys.

  ADR claims that, on July 13, 2001, MCY specifically authorized in writing that ADR had the right to sell certain Bilstein Products to Pep Boys. Thereafter, ADR aggressively campaigned to promote the Bilstein Products to Pep Boys. On or about October 12, 2001, ADR and Pep Boys entered into a Confidentiality and Non-Disclosure Agreement concerning the possible sale, delivery, and service of the Bilstein Products to Pep Boys. The plaintiff further asserts that, on October 24, 2001, the defendant specifically advised Pep Boys in writing that ADR was authorized to sell, deliver, supply, and service all of the Pep Boys needs nationwide only with regard to certain Bilstein Products.

  In April 2002, the defendant demanded that it become more involved in the final negotiations between ADR and Pep Boys. MCY also informed ADR that it no longer wanted the plaintiff to have the right to sell Bilstein Products nationwide to the 635 Pep Boys stores, but instead only to the 281 Pep Boys stores located East of the Mississippi. The plaintiff asserts that an agreement, dated April 23, 2002 (the "Pep Boys Agreement"), recognized that ADR would service the 281 Pep Boys stores. In particular, the agreement states, in pertinent part: Page 5

 
[T]his shall serve as a "deal memo" to be followed later by a Service Agreement specifically recognizing that ADR shall service each and all of the Pep Boys stores east of the Mississippi, even though Pep Boys is a national account as defined in the [Jobber] Agreement dated March 8, 2001 between us, in the hopes that the program I have negotiated with Pep Boys will be successful for the customer and for each of us.
  Shortly after the execution of the Pep Boys Agreement, the plaintiff claims that Marty C. Yacobian, CEO of MCY, denied that the agreement existed and informed Ari Yemimi, president of ADR, that it would not be paid any commissions on the Pep Boys account. In addition, the plaintiff asserts that Yacobian threatened Yemini that if he interfered with the Pep Boys account, ADR would lose all of its rights under the Jobber Agreement. ADR claims that MCY began an aggressive campaign against ADR in an attempt to cancel the Jobber Agreement and avoid paying ADR its commissions under the Pep Boys Agreement. In December 2002, ADR learned that Pep Boys was ordering Bilstein Products directly from MCY. On April 17, 2003, the defendant advised ADR in writing that the Jobber Agreement with ADR had been terminated due to ADR's failure to correct breaches of that agreement.

  On May 16, 2003, the plaintiff commenced this action asserting four breach of contract claims arising from the Pep Boys Agreement. On June 27, 2003, the defendant commenced an arbitration proceeding in California before the American Arbitration Association. In the arbitration proceeding, the defendant alleges that ADR Page 6 breached the Jobber Agreement by, among other things, failing to properly service Bilstein Products in its territory.

  MCY brings this motion to compel arbitration of the issues in this case, arguing that the Pep Boys Agreement was only a "deal memo" and "outline" that contemplated a future service agreement that was never finalized due to ADR's own failures. The defendant also argues that the plaintiff's claims are governed by the arbitration clause in the Jobber Agreement because the Pep Boys Agreement merely amended the Jobber Agreement. In addition, the defendant ...


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