Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Official citation and/or docket number and footnotes (if any) for this case available with purchase.

Learn more about what you receive with purchase of this case.

TRAVELCLICK, INC. v. OPEN HOSPITALITY INC.

United States District Court, S.D. New York


July 23, 2004.

TRAVELCLICK, INC., Plaintiff,
v.
OPEN HOSPITALITY INC., et al., Defendants.

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

Memorandum Opinion and Order

Plaintiff TravelClick, Inc. ("TravelClick"), brings this action against five individual defendants — David Millili, Brian Dass, Jimmy Yong Choe, Anthony Cowlam, and Martin Kalanda — and Open Hospitality Inc. ("Open"), a corporation founded by Dass and Millili that currently employs all of the individual defendants. The plaintiff alleges that the individual defendants misused confidential information they came to posses in the course of their employment for Timeless Hospitality Corporation ("Timeless"), a company which had previously been acquired by TravelClick.*fn1 Plaintiff asserts causes of action under the Computer Fraud and Abuse Act, 18 U.S.C. § 1030; the Lanham Act, 15 U.S.C. § 1125(a); New York Gen. Bus. Law § 349; and a variety of common law claims, including breach of the confidentiality provisions of the individual defendants' employment agreements. The alleged breach of these confidentiality provisions underlies all of the plaintiff's claims. (Compl. ¶¶ 19-57, 61-73, 116-125.) The individual defendants have moved to stay the action in favor of arbitration, arguing that this dispute is subject to the arbitration provisions of the employment agreements between the individual defendants and Timeless. For the reasons given below, the individual defendants' motion is granted.

FACTS

  Plaintiff TravelClick is a Delaware corporation that provides a variety of electronic-based services to the hotel industry. (Compl. ¶ 1.) On December 3, 2003, TravelClick acquired Timeless, an internet-based hotel reservation and booking engine. (Compl. ¶¶ 2, 14.) The individual defendants are former Timeless employees. (Compl. ¶¶ 4-8.) The complaint alleges that, upon resigning from Timeless, Dass and Millili co-founded Open, a company that provides services similar to Timeless, and hired the other individual defendants away from Timeless. (Compl. ¶¶ 3-8, 24-61.) The complaint further alleges that the defendants proceeded to make use of Timeless' confidential information in a manner prohibited by their respective contractual agreements with Timeless. (Compl. ¶¶ 24-73.)

  Around the fall of 2001, approximately 2 years before TravelClick acquired Timeless, each of the individual defendants entered into some type of employment agreement with Timeless. (Compl. ¶¶ 19, 24, 26, 31, 36, 45, 56.) Defendants Choe and Kalanda entered into identical agreements, titled "Employment, Confidential Information, Invention Assignment and Arbitration Agreement," with Timeless. (See Choe and Kalanda Employment, Confidential Information, Invention Assignment and Arbitration Agreements, attached as Ex. B and as Ex. D to Aff. of Susan J. Kohlmann.) Under the heading "9. Arbitration and Equitable Relief," their agreements provide in pertinent part:

(a) Disputes. Except as provided in Section 9(c) below, I agree that any dispute or controversy arising out of, relating to or in connection with the interpretation, validity, construction, performance, breach or termination of this Agreement shall be settled by binding arbitration to be held in New York, New York, in accordance with the Commercial Arbitration Rules, supplemented by the Supplemental Procedures for Large Complex Disputes, of the American Arbitration association as then in effect (the "Rules"). The arbitrator may grant injunctions or other relief in such dispute or controversy. The decision of the arbitrator shall be final, conclusive and binding on the arbitration. Judgment may be entered on the arbitrator's decision in any court of competent jurisdiction. If I am the prevailing party in any arbitration, the Company shall pay my reasonable travel expenses incurred in connection with the arbitration, attorney's fees and other costs.
(b) Consent to Personal Jurisdiction. The arbitrator(s) shall apply New York law to the merits of any dispute or claim, without reference to conflicts of law rules. I hereby consent to the personal jurisdiction of the state and federal courts located in New York for any action or proceeding arising from or relating to this Agreement or relating to any arbitration in which I am a participant.
(c) Equitable Relief. The parties may apply to any court of competent jurisdiction for temporary restraining order, preliminary injunction, or other interim or conservatory relief, as necessary, without breach of this arbitration and without abridgment of the powers of the arbitrator.
(d) Acknowledgment. I HAVE READ AND UNDERSTAND SECTION 9 WHICH DISCUSSES ARBITRATION. I UNDERSTAND THAT BY SIGNING THIS AGREEMENT, I AGREE TO SUBMIT ANY CLAIMS ARISING OUT OF, RELATING TO, OR IN CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY, CONSTRUCTION, PERFORMANCE, BREACH OR TERMINATION THEREOF, TO BINDING ARBITRATION, EXCEPT AS PROVIDED IN SECTION 9, AND THAT THIS ARBITRATION CLAUSE CONSTITUTES A WAIVER OF MY RIGHT TO A JURY TRIAL AND RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF THE RELATIONSHIP BETWEEN THE PARTIES.
  (Kohlmann Aff., Ex. B and D, ¶ 9 (emphasis in original).) Defendant Cowlam entered into an agreement, titled "Consulting Agreement" with Timeless on September 9, 2001. (Compl. ¶ 26.) The agreement contains an arbitration provision almost identical to that of Choe's and Kalanda's agreements, the only difference being the absence of an "Acknowledgment" clause and slightly different wording in the beginning of the first paragraph: "Except as provided in Section 13(c) below, the Company and Consultant agree that any dispute or controversy. . . ." (Consulting Agreement ¶ 13, attached as Ex. C to Aff. of Susan J. Kohlmann.)

  The agreements of Choe, Kalanda, and Cowlam also contain a virtually identical "Confidential Information" provision, the only difference being that Cowlam is referred to as "consultant" as opposed to the first person used in Choe's and Kalanda's agreements. (Compare Kohlmann Aff., Ex. B ¶ 2 and D ¶ 2 with Kohlmann Aff., Ex. C ¶ 2.)

  On October 19, 2001, defendants Dass and Millili each entered into two agreements with Timeless. (Compl. ¶¶ 19, 36, 45, 46.) The first agreement, which the Court will refer to as the "Primary Employment Agreement," was titled "Employment Agreement." (David Millili and Brian Dass Employment Agreements, attached as Ex. B to Aff. of David Millili and as Ex. A to Aff. of Brian Dass.) The second agreement, which the Court will refer to as the "Supplemental Employment Agreement," was titled "Employment, Confidential Information and Invention Assignment Agreement." (David Millili and Brian Dass Employment, Confidential Information, and Invention Assignment Agreements, attached as Ex. F and E to Aff. of Susan J. Kohlmann.) The Primary Employment Agreements set forth the specific terms and conditions of Millili's and Dass' employment, including the obligation to execute the Supplemental Employment Agreements, which relate primarily to the use of confidential information and intellectual property.

  Millili's and Dass' Primary Employment Agreements contain a provision, titled "16. Arbitration," that is similar to the provisions of the same name found in the agreements of Choe, Kalanda, and Cowlam. The full text of the provision from Dass' and Millili's agreements reads:

(a) Executive agrees that any dispute or controversy arising out of, relating to, or in connection with this Agreement, or the interpretation, validity, construction, performance, breach or termination thereof, shall be settled by binding arbitration to be held in New York, New York in accordance with the National Rules for the Resolution of Employment Disputes then in effect of the American Arbitration Association (the "Rules"). The arbitrator may grant injunctions or other relief in such dispute or controversy. The decision of the arbitrator will be final, conclusive and binding on the parties to the arbitration. Judgment may be entered on the arbitrator's decision in any court having jurisdiction.
(b) The arbitrator(s) will apply New York law to the merits of any dispute or claim, without reference to rules or conflicts of law. The arbitration proceedings will be governed by federal arbitration law and by the Rules, without reference to state arbitration law. Executive hereby consents to the personal jurisdiction of the state and federal courts located in New York for any action or proceeding arising from or relating to this Agreement or relating to any arbitration in which the parties are participants.
(c) EXECUTIVE HAS READ AND UNDERSTANDS THIS SECTION, WHICH DISCUSSES ARBITRATION. EXECUTIVE UNDERSTANDS THAT BY SIGNING THIS AGREEMENT, EXECUTIVE AGREES TO SUBMIT ANY CLAIMS ARISING OUT OF, RELATING TO, OR IN CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY, CONSTRUCTION, PERFORMANCE, BREACH OR TERMINATION THEREOF TO BINDING ARBITRATION, AND THAT THIS ARBITRATION CLAUSE CONSTITUTES A WAIVER OF EXECUTIVE'S RIGHT TO A JURY TRIAL AND RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF THE EMPLOYER/EMPLOYEE RELATIONSHIP, INCLUDING BUT NOT LIMITED TO, DISCRIMINATION CLAIMS.*fn2 (Millili Aff., Ex. B, ¶ 16 (emphasis in original); Dass Aff., Ex. A, ¶ 16 (emphasis in original).)
  Millili's and Dass' Primary Employment Agreements also contain an "Integration" clause: "This Agreement, together with the Option Plan, Option Agreement and the Confidential Information Agreement [i.e. the Supplemental Employment Agreement] represents the entire agreement and understanding between the parties as to the subject matter herein and supersedes all prior or contemporaneous agreements whether written or oral." (Millili Aff., Ex. B, ¶ 17; Dass Aff., Ex. A, ¶ 17.)

  The Supplemental Employment Agreements executed by Dass and Millili do not contain an arbitration clause in addition to the one contained in their Primary Employment Agreements. However, both Supplemental Employment Agreements contain a subsection titled "Governing Law; Consent to Personal Jurisdiction." That subsection provides:

This Agreement will be governed by the laws of the State of New York. I hereby expressly consent to the personal jurisdiction of the state and federal courts located in New York for any lawsuit filed there against me by the Company arising from or relating to this Agreement.
(Kohlmann Aff., Ex. F and E, ¶ 9(a).)
  Open is not alleged to have been party to any contractual agreements with the plaintiff. DISCUSSION

  The Federal Arbitration Act, 9 U.S.C. § 1 et seq. (1988), "reflecting Congress' recognition that arbitration is to be encouraged as a means of reducing the costs and delays associated with litigation," requires federal courts to enforce arbitration agreements. Vera v. Saks & Co., 335 F.3d 109, 116 (2d Cir. 2003) (quotations omitted). To that end, a court must stay proceedings in favor of arbitration on issues as to which an arbitration agreement has been signed. See WorldCrisa Corp. v. Armstrong, 129 F.3d 71, 74 (2d Cir. 1997).

  The Second Circuit has instructed courts to consider four factors in determining whether to stay a proceeding in favor of arbitration: (1) whether the parties agreed to arbitrate; (2) the scope of that agreement; (3) if federal statutory claims are asserted, whether Congress intended those claims to be nonarbitrable; and (4), if the court concludes that some, but not all of the claims in the case are arbitrable, whether to stay the balance of the proceedings pending arbitration.*fn3 See Martin v. SCI Mgmt. L.P., 296 F. Supp.2d 462, 467 (S.D.N.Y. 2003) (quotations omitted). Whether the parties agreed to arbitration and the scope of that agreement are matters of contract law. Cf. Oldroyd v. Elmira Sav. Bank, FSB, 134 F.3d 72, 76 (2d Cir. 1998) (noting that Federal Arbitration Act "requires courts to enforce privately negotiated agreements to arbitrate, like other contracts, in accordance with their terms"); WorldCrisa, 129 F.3d at 74 ("Arbitration is essentially contractual, however, and parties may not be forced into arbitration if that was not their true agreement").

  New York law requires contracts to "be construed to effectuate the intent of the parties as derived from the plain meaning of the [contract]." Andy Warhol Found. for the Visual Arts, Inc. v. Federal Ins. Co., 189 F.3d 208, 215 (2d Cir. 1999). Accord Metro. W. Asset Mgmt., LLC v. Magnus Funding, Ltd., No. 03 Civ. 5539 (NRB), 2004 WL 1444868, at *5 (S.D.N.Y. June 25, 2004) ("Under New York law, contracts must be interpreted to give effect to the intent of the parties as expressed in the clear language of the contract"). "[T]he existence of a broad agreement to arbitrate creates a presumption of arbitrability which is only overcome if it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute." WorldCrisa, 129 F.3d at 74.

  The individual defendants argue that, given the arbitration provisions in their respective employment contracts, this action should be stayed in favor of arbitration. (See Defs.' Mem. of Law in Support of Mot. to Stay at 7-19.) TravelClick does not dispute the validity of the agreements or the arbitration provisions, but rather disputes that the provisions bar the current action. (See Pl.'s Mem. of Law in Opp'n to Defs.' Mot. to Stay at 2 (hereinafter "Opp'n").) TravelClick argues that the claims against Choe, Kalanda, and Cowlam are "excepted" from arbitration because the "Equitable Relief" provision of the arbitration clause in their contracts states that "[t]he parties may apply to any court of competent jurisdiction for a temporary restraining order, preliminary injunction, or other interim or conservatory relief, as necessary, without breach of this arbitration agreement and without abridgement of the powers of the arbitrator." (Opp'n at 4-5 (emphasis omitted).) TravelClick also argues that the claims against Dass and Millili can proceed because, by the terms of their Supplemental Employment Agreements, they "expressly consent[ed] to personal jurisdiction of the state and federal courts located in New York for any lawsuit filed there . . . arising from or relating to this . . . Agreement." (Opp'n at 5 (emphasis omitted; brackets in original).) Neither argument is persuasive.

  Turning first to TravelClick's argument regarding Choe, Kalanda, and Cowlam, the Court notes that the complaint's prayer for relief seeks (a) both a preliminary and permanent injunction; (b) payment for "all of Plaintiff's economic loss and damage;" (c) payment for "all of Defendant's [sic] profits, gains, and advantages;" and (d) an award of costs for suit, expenses, and attorneys' fees. (Compl. at 20.) However, despite the use of a standardized request for a preliminary injunction in its prayer for relief, the plaintiff has taken no steps to seek such relief since filing the complaint (and, given the passage of time, would unlikely be able to establish the need for such relief). Moreover, the passing reference to a demand for a preliminary injunction does not convert a standard complaint into a proceeding seeking the "temporary," "preliminary," "interim or conservatory relief" contemplated by the "Equitable Relief" provision of the arbitration clause in the agreements of Choe, Kalanda, and Cowlam.

  The Court interprets the "Equitable Relief" provision as providing the parties a narrow exception to arbitration, an exception that allows the parties to turn to the courts in emergency circumstances to preserve the status quo while the parties seek permanent resolution outside the court system. Plaintiff's complaint, whether or not it incorporates a prayer for preliminary injunctive relief, seeks a final and permanent resolution through the court system. If TravelClick were to prevail in this action, there would be no dispute left to arbitrate or otherwise resolve outside the court system. The Court does not read the "Equitable Relief" provision to allow such a broad circumvention of the agreement to arbitrate. Accordingly, the Court finds that all the claims asserted against Choe, Kalanda, and Cowlam are governed by the parties' agreement to arbitrate and thus should be stayed in favor of arbitration.*fn4

  With respect to Dass and Millili, the plaintiff's argument assumes the "Governing Law; Consent to Personal Jurisdiction" clause in the Supplemental Employment Agreement is an agreement of the parties to litigate any claims arising out of the confidentiality provisions of that agreement in New York federal or state court. Presumably, under that view, the "Arbitration" clause in the Primary Employment Agreement applies only to claims arising out of that agreement whereas any claims arising out of the Supplemental Employment Agreement are to be litigated in court. Such a reading, however, strains the plain language of the two agreements, which must be read together.

  As a preliminary matter, consent to personal jurisdiction under the Supplemental Employment Agreement does not equate to an agreement to litigate any claims related to that agreement. Had the parties intended to agree to litigate any claims related to the Supplemental Employment Agreement, they could have written that into the contract rather than rely on a "Consent to Personal Jurisdiction" clause which permits, but does not mandate, litigation. At most the clause sets forth the forum for any litigation but does not establish the terms or conditions upon which the parties agree to resolve disputes through the litigation process.

  In addition, the interpretation suggested by TravelClick is contradicted by the arbitration clause in the Primary Employment Agreement, which refers all claims arising out of "ALL ASPECTS OF THE EMPLOYER/EMPLOYEE RELATIONSHIP" to arbitration. (Millili Aff., Ex. B, ¶ 16(c) (emphasis in original); Dass Aff., Ex. A, ¶ 16(c) (emphasis in original).) "[T]his is precisely the kind of broad arbitration clause that justifies a presumption of arbitrability." Oldroyd, 134 F.3d at 76. This conclusion is supported by the existence of an integration clause in the Primary Employment Agreement which indicates that the parties intended to read the various employment agreements between Timeless and Millili and Dass as part of a unitary whole. Even ignoring the integration clause, the texts of the two agreements indicate that the parties intended them to be interpreted as one whole, with provisions of one agreement applying to provisions of the other. Indeed, the "Confidential Information" clause of the Primary Employment Agreement explicitly cross-references and requires the execution of the confidentiality provisions of the Supplemental Employment Agreement.

  Thus, it is clear from the language of Dass' and Millili's contracts — like the contracts of Choe, Kalanda, and Chowlam — that the parties have agreed to arbitrate all claims arising out of their employment relationship with Timeless. Each agreement contains a broad arbitration clause. See, e.g., Oldroyd, 134 F.3d at 74. Plaintiff has failed to point out any language that would negate the presumption of arbitrability, see WorldCrisa Corp., 129 F.3d at 74, and adoption of the plaintiff's suggested interpretation would create contradictions where none should exist. Such an interpretation must be rejected. See Galli v. Metz, 973 F.2d 145, 149 (2d Cir. 1992) ("An interpretation of a contract that has the effect of rendering at least one clause superfluous or meaningless . . . is not preferred and will be avoided if possible."). The Court finds that the claims against Dass and Millili are subject to the arbitration clauses of their respective agreements, and thus should be stayed in favor of arbitration.

  Finally, because the claims against Open are tied to the same facts as the claims against the individual defendants, it would be an inefficient use of the Court's resources to adjudicate claims against one defendant when identical claims are being arbitrated against the other defendants. See, e.g., Orange Chicken, 2000 WL 1858556, at *8. Thus, the Court will stay the claims against Open pending resolution of the claims against the individual defendants.

  CONCLUSION

  For the foregoing reasons, the defendants' motion to stay this action in favor of arbitration [5-1] is GRANTED. The Clerk shall place this action on the Court's suspense docket. Plaintiff is instructed to inform the Court by letter once the disputes against the individual defendants are resolved through arbitration or otherwise. SO ORDERED.


Buy This Entire Record For $7.95

Official citation and/or docket number and footnotes (if any) for this case available with purchase.

Learn more about what you receive with purchase of this case.