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KATEL LLC v. AT&T CORPORATION

United States District Court, S.D. New York


May 27, 2004.

KATEL LLC, et al., Plaintiffs, -against- AT&T CORPORATION, Defendant

The opinion of the court was delivered by: RICHARD HOLWELL, District Judge

Memorandum Opinion and Order

This action was filed on March 28, 2002, by Katel LLC ("Katel") against AT&T Corporation ("AT&T") and was originally assigned to the Hon. William H. Pauley III, United States District Judge for the Southern District of New York. By order dated September 8, 2003, Judge Pauley granted the motion of Kyrgyztelecom JSC ("KT") to intervene as a plaintiff in this action. KT filed cross-claims against Katel on November 3, 2003. On November 7, 2003, this matter was reassigned to this Court. Shortly thereafter, Katel counter-claimed against KT.

In response to these counter-claims, KT's moves to compel arbitration and stay resolution of the cross-claims and counter-claims pending in this suit. (See generally Mem. of Law in Support of Pl. KT's Mot. to Compel (hereinafter "Br.").) Katel opposes the motion on the ground that KT has waived its right to arbitration.*fn1 (See generally Mem. of Law in Opp'n to Pl. KT's Mot. to Compel (hereinafter "Opp'n").) Federal policy strongly favors arbitration and any doubts concerning whether there has been a waiver are resolved in favor of arbitration. See PPG Indus., Inc. v. Webster Auto Parts Inc., 128 F.3d 103, 107 (2d Cir. 1997). "The question of whether a party's pretrial conduct amounts to waiver of arbitration is purely a legal one" and "is decided in the context of the case, with a healthy regard for the policy of promoting arbitration." Leadertex, Inc. v. Morganton Dyeing & Finishing Corp., 67 F.3d 20, 25 (2d Cir. 1995). Though the issue is fact-specific, with no bright-line rules, courts generally consider (1) the time elapsed from the commencement of the litigation to the request for arbitration; (2) the amount of litigation (including exchanges of pleadings, any substantive motions, and discovery); and (3) proof of prejudice, including taking advantage of pretrial discovery not available in arbitration, delay, and expense.*fn2 See S&R Co. of Kingston v. Latona Trucking, Inc., 159 F.3d 80, 83 (2d Cir. 1998).

  Applying these factors, the Court finds that KT has not waived its right to arbitration. KT joined suit in September 2003, and has asserted its right to arbitration multiple times since then. KT first asserted its right to arbitration in its complaint against Katel, filed in November 2003. (See Compl. and Cross-Compl. at ¶¶ 5, 73, 77.) KT asserted its right to arbitration again in its Answer to Katel's counter-claims. (See KT Answer to Katel Cross-Claim, First Aff. Defense.) When this action was transferred to this Court, KT asserted its right to arbitration yet again by letter to the Court, dated December 12, 2003. At the parties' first conference before this Court, on March 12, 2004, KT raised the issue of arbitration once again. Thus, very little time elapsed between KT's entry into this litigation and assertion of its right to arbitration, even ignoring the fact that KT asserted its right to arbitration multiple times.*fn3

  As to the second factor, the parties have filed pleadings, attended status and scheduling conferences, and engaged in document discovery.*fn4 However, no motions have been decided.*fn5 There have been no depositions or settlement conferences. None of the cases cited by Katel find waiver to have occurred under similar circumstances. See, e.g., S&R, 159 F.3d at 84 (noting that amount of litigation included three depositions, two settlement conferences, and motions "pertain[ing] to substantial issues going to the merits"); Satcom Int'l Group PLC v. Orbcomm Int'l Partners, L.P., 49 F. Supp.2d 331, 340 (S.D.N.Y. 1999) (noting that amount of litigation included four depositions, one settlement conference, and "mini-trial" preliminary injunction hearing).

  With respect to the last factor, Katel argues that it was prejudiced because KT obtained discovery in this litigation "to which it would not have been entitled in arbitration under the AAA rules, which reserve the availability and extent of discovery, if any, to the arbitrator's sole discretion."*fn6 (Opp'n at 9.) Although discovery is generally more limited in arbitration, it is not uncommon for an arbitrator to allow document discovery. See Reply at 5 (citing Rule 21 of the AAA Commercial Arbitration Rules, allowing arbitrator to direct production of documents). The Court believes that, for the most part, the parties' "efforts thus far are transferable to arbitration and therefore have not been wasted." Media Edge v. W.B. Doner, Inc., 112 F. Supp.2d 383, 385 (S.D.N.Y. 2000). The Court is also persuaded by KT's argument that Katel was nevertheless obligated to produce these documents by virtue of the separate claims (to which KT is a party) involving AT&T — claims that are not subject to the arbitration clause. (See Reply at 5.)

  Considering the factors, the Court finds that KT has not waived its right to arbitration. Indeed, no case cited by Katel found waiver to have occurred based on the short amount of time lapse, the infancy of the litigation, and the lack of prejudice in this case.

  CONCLUSION

  For the foregoing reasons, KT's Motion to Compel Arbitration and Stay Cross-Claims [42-1] is GRANTED. The Court also hereby stays all claims between KT and Katel pending resolution of the arbitration. Thus, KT's Motion to Dismiss [46-1] is denied without prejudice to being re-filed after conclusion of the arbitration. However, the Court will allow claims by KT and Katel against AT&T to proceed.

  SO ORDERED.


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