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Compaq Computer Corp. Dartnell Enterprises

January 12, 2007

COMPAQ COMPUTER CORPORATION,*FN1 PLAINTIFF,
v.
DARTNELL ENTERPRISES, INC., DEFENDANT.



The opinion of the court was delivered by: Charles J. Siragusa United States District Judge

CORRECTED DECISION AND ORDER

INTRODUCTION

This matter is before the Court on a motion by plaintiff Hewlett-Packard Company (successor-in-interest to Compaq Computer Corporation), for a permanent injunction, pursuant to the All Writs Act, enjoining defendant Dartnell Enterprises, Inc. ("Dartnell") from pursuing its New York State lawsuit against Hewlett-Packard Company ("HP"), seeking damages under Massachusetts General Statutes 93A section 2 and 11.*fn2 For the reasons stated below, the motion is denied.

BACKGROUND

From the state court complaint, attached as an exhibit to plaintiff's moving papers, the Court assumes the following as true for the purposes of this motion. HP is incorporated in the State of Delaware with its principal place of business in Palo Alto, California. HP is the successor in interest to Compaq Computer Corporation ("Compaq"), which had its principal place of business in Houston, Texas. Dartnell is also incorporated in Delaware, with its principal place of business in Rochester, New York. Also mentioned in the complaint is Digital Equipment Corporation ("DEC"), Dartnell's original business partner, which was purchased by Compaq in June 1998. Dartnell is a national distributor and reseller of computer products and provider of services, as well as contract labor. Thus, according to the state court complaint, HP is the successor in interest to both DEC and Compaq.

On March 30, 1998, DEC and Dartnell signed a release and settlement agreement, a copy of which is attached to the state court complaint as Exhibit A. Dartnell alleged that Compaq and its successor, HP, failed to implement the terms of the release and settlement agreement and, after months of negotiations, Compaq agreed to settle the matter in arbitration. In that regard, Dartnell and Compaq signed an arbitration agreement, governed by Massachusetts law, on November 12, 2001, a copy of which is attached to the state court complaint as Exhibit B. Dartnell is relying in its state court action on certain language in the arbitration agreement, which it contends preserved its right to bring a separate lawsuit against HP, as successor in interest to Compaq, with regard to the original breach of the 1998 settlement agreement. The language Dartnell relies on is as follows:

1. Scope of Agreement

The Parties agree to arbitrate all claims or disputes associated with or arising out of the performance of the 1998 Agreements. The Parties agree that the Settlement Agreement was a binding compromise and settlement of the disputes between the Parties that had arisen prior to the execution of the Settlement Agreement. The Parties acknowledge the validity of the Settlement Agreement, and acknowledge that the Settlement Agreement operated to release and settle any and all claims between the Parties that arose prior to its execution. The Parties therefore agree to arbitrate claims flowing from the Parties' conduct since the execution of the Settlement Agreement. For the purposes of this arbitration only, Compaq agrees not to contest that it breached certain provisions of the 1998 Agreements, for the purposes of assessing damages, if any, arising from any claimed breaches of the 1998 Agreements. Nothing in the foregoing sentence shall prevent Compaq from presenting facts or legal theories at the arbitration as to the amount of damages, if any, of any agreement breached. Further, for the purposes of this arbitration only, Campaq agrees to not assert any liability disclaimer, nor to assert the $1 million liability limit contained in the 1998 Agreements. [*fn3 Finally, for the purposes of this arbitration only, Dartnell agrees not to assert any claims based on oral arguments, promises or representations, including any claim to an exclusive distributorship for Compaq's federal Value Added Resellers, or any claims based on allegations of bad faith.] The foregoing sentence shall not limit either party's right (subject to applicable law or rules of evidence) to introduce oral evidence with respect to Dartnell's claims that Compaq breached the written terms of the 1998 Agreements. (Arbitration Agreement ¶ 1 (attached to Schultz Decl. (# 38) as Ex. C).) One of the signatories to the Arbitration Agreement was H. Todd Bullard, counsel for Dartnell. On November 7, 2002, following a six-day evidentiary hearing, the arbitration panel of three lawyers, one of whom was a retired New York State judge, issued a final award in Dartnell's favor, a copy of which is attached to the state court complaint as Exhibit C. The arbitrators awarded Dartnell $15,030,000.00 as damages for Compaq's breach of contract. The Arbitration Award also addressed the issue of damages pursuant to chapter 93A of the General Law of Massachusetts and held that,

In its Statement of Claim, Dartnell also presented tentatively a claim of violation of General Laws of Massachusetts, Chapter 93A, which prohibits "unfair or deceptive act[s] or practice[s]" in trade or commerce. This claim was not mentioned in Dartnell's Supplemental Statement of Claim, nor was it presented in the evidentiary hearing. Moreover, this claim is beyond the scope of the Arbitration Agreement (Exh. 1, par. 1). Dartnell's Chapter 93A claim, to whatever extent put forward, is denied. (Arbitration Award (Compl. Ex. C) ¶ 9.)

On December 23, 2002, Compaq commenced an action before this Court seeking to vacate the Arbitration Award pursuant to the Federal Arbitration Act, 9 U.S.C. § 10(a). In a Decision and Order entered on August 6, 2003, the Court determined that, contrary to Compaq's assertions, the arbitrators did not exceed their powers and that the award was not made in manifest disregard of the law. Accordingly, the Court granted Dartnell's cross-motion to confirm the Award and denied Compaq's motions to vacate the Award and seal the file. (Decision and Order, Compaq Computer Corporation v. Dartnell Enterprises, Inc., No. 02-CV-6672 CJS(F) (W.D.N.Y. Aug. 6, 2003).) Compaq did not appeal the decision.

Dartnell contends in paragraph 29 of its state court complaint that "[t]he Parties bifurcated their claims by agreement. The punitive and bad faith claims were bifurcated from the breach of contract claims and reserved." Further, Dartnell asserts in paragraph 30 of the state court complaint that "[t]he collateral claims involving bad faith under Gen. L. Mass., Chapter 93A were not resolved or otherwise made a part of the arbitration.. In addition, other claims related to oral agreements, promises or representations were not part of the arbitration." HP now seeks a permanent injunction on the theory that Dartnell's state court action, "is a clear attempt to undermine the Court's confirmation order and the arbitration award by treating the arbitration and this Court's order as stepping stones to additional litigation (i.e., its Massachusetts bad faith claim), instead of a final resolution of the parties' disputes." (HP's Mem. of Law (# 39) at 6.)

STANDARDS OF LAW

The All Writs Act

The All Writs Act is codified in the U.S. ...


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