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Optimus Communications v. Mpg Associates

January 27, 2012

OPTIMUS COMMUNICATIONS,
PLAINTIFF,
v.
MPG ASSOCIATES, INC.,
DEFENDANT.



The opinion of the court was delivered by: Spatt, District Judge.

MEMORANDUM OF DECISION AND ORDER

The Plaintiff, Optimus Communications ("Optimus"), commenced this action on May 23, 2011, alleging that the Defendant, MPG Associates, Inc. ("MPG"), violated the terms and conditions of a commission agreement by soliciting business from present and former customers of the Plaintiff and failing to pay certain commissions to the Plaintiff as required by the agreement. The Defendant has now moved to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) and has also moved for sanctions pursuant to Federal Rule of Civil Procedure 11.

I. BACKGROUND

On September 10, 2006, the Plaintiff Optimus and the Defendant MPG entered into a business agreement (the "Agreement") relating to the sale of Verizon products and/or services. Pursuant to this written contract, Optimus was to receive eighty percent "of all gross commissions . . . in connection with sales to clients consummated by [Optimus], and sold at any time since the inception of doing business with MPG in April 2005." (Pl. Ex. 1.) The Agreement was to be effective for any sales that had taken place as early as April 2005 and was to continue through December 31, 2009.

The contract contained a dispute resolution provision, titled "Mediation and Arbitration". This provision stated, in part, that: "Any disputes between the parties hereto, whether arising under this Agreement or otherwise, which the parties cannot resolve between themselves using good faith shall be: Referred by either party to a mediator in the County of the principal office of [MPG], and any mediation shall be held in the County of the principal office of [MPG]." (Id.) The provision goes on to state that:

In the event that said dispute is not resolved in mediation, the parties shall submit the dispute to a neutral arbitrator . . . Prevailing party in any legal action shall recover all fees and costs. . . . The parties further agree that full discovery shall be allowed to each party to the arbitration and a written award shall be entered forthwith. . . . The decision of the arbitrator shall be final and binding. Arbitration shall be the exclusive legal remedy of the parties. (Id.)

On May 23, 2011, the Plaintiff filed the present action based upon allegations that

(1) "[i]n violation of the terms and conditions of the Agreement, Defendant assigned Plaintiff's commissions without prior written notice to Plaintiff"; (2) "Defendant failed to pay commissions to Plaintiff as required by the Agreement"; and (3) "Defendant circumvented, avoided and bypassed Plaintiff in direct violation of the terms and conditions of the Agreement." (Compl. at ¶¶ 9--11.) The Plaintiff alleges several causes of action, including breach of contract and unjust enrichment. Optimus claims that MPG owes it a balance of $242,875.09, plus interest, attorneys' fees and costs.

On June 13, 2011, the Defendant's counsel emailed the Plaintiff's counsel to request an extension of time for MPG to respond to the complaint, and stated that his intent was to move to dismiss the action in light of the arbitration clause in the Agreement. The Defendant's counsel also requested that the Plaintiff immediately dismiss the action in accordance with Federal Rule of Civil Procedure ("Fed. R. Civ. P.") 41(A)(1)(a) because of the dispute resolution provision, and warned that if the Plaintiff declined to do so, that MPG would be forced to move to dismiss, and would seek Fed. R. Civ. P. 11 ("Rule 11") sanctions for presenting a pleading whose claims are not warranted by existing facts and law. In response, the Plaintiff's counsel responded that she was unable to grant his request for an extension of time to answer and that he should proceed as he deemed appropriate.

On July 18, 2011, the Defendant filed the instant motion to dismiss the action, pursuant to Fed. R. Civ. P. 12(b)(6), based upon the dispute resolution clause contained in the contract. According to MPG, Optimus never sought mediation or arbitration in accordance with the terms of the contract, and instead commenced the instant action seeking damages for breach of the Agreement. Thus, MPG argues that the Court should dismiss the action.

In addition, on July 18, 2011, the Defendant moved for Rule 11 Sanctions against the Plaintiff's counsel, for failure to voluntarily dismiss the action in light of the dispute resolution clause in the Agreement and for initially filing a complaint without any legal merit.

II. DISCUSSION

A.As to MPG's Motion to Dismiss

The Federal Arbitration Act ("FAA") provides, in pertinent part, that a written provision in a "contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract . . . 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. It is well-established that the FAA creates a strong federal policy in favor of arbitration. Moses H. Cone Memorial Hospital v. Mercury Constr. Corp., 460 U.S. 1, 24-25, 103 S. Ct. 927, 74 L. Ed. 2d 765 (1983); see Arciniaga v. General Motors Corp., 460 F.3d 231, 234 (2d Cir. 2006) (noting that "it is difficult to overstate the strong federal policy in favor of arbitration, and it is a policy we have often and emphatically applied."). Indeed, the FAA "establishes that, as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration." Moses H. Cone, 460 U.S. at 24-25, 103 S. Ct. 927; see United Steelworkers of Am. v. Warrior & ...


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