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Tdg Acquisition Company, LLC v. Vuzix Corporation

May 8, 2013

TDG ACQUISITION COMPANY, LLC,
JOHN DOE #1,
PLAINTIFF,
v.
VUZIX CORPORATION,
PAUL J. TRAVERS,
DEFENDANTS.



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

DECISION & ORDER

INTRODUCTION

Siragusa, J. In this case Plaintiff alleges unfair competition pursuant to 15 U.S.C. § 1125(a) and computer fraud and abuse pursuant to 18 U.S.C. § 1030, as well as tortious interference with a business relationship and unfair competition pursuant to state law. It is before the Court on Defendants' Rule 12(b)(6) motion requesting dismissal of this action on the ground that the written Asset Purchase Agreement among the parties that is the subject of the Complaint provides that all disputes between the parties arising out of, relating to, or in connection with that agreement and its related agreements and their performance are to be resolved through mandatory arbitration as provided in the agreement.

Defs.' Notice of Motion at 1, Feb. 8, 2013, ECF No. 13. For the reasons stated below, Defendants' application is granted.

FACTUAL BACKGROUND

For the purposes of this motion, the Court assumes that the allegations in the complaint are true. Plaintiff TDG Acquisition Company, LLC ("TDG"), purchased certain intellectual property from Vuzix Corporation ("Vuzix") relating to hands free displays for accessing data and video. Those displays have military, commercial, industrial, and consumer applications. As part of the purchase, Vuzix agreed not to compete for business from military, defense and security organizations. TDG alleges that "Vuzix immediately violated its obligation and the Asset Purchase Agreement."*fn1 Compl. ¶ 2.

The Asset Purchase Agreement, dated June 15, 2012, was signed by James P. Balet ("Balet") on behalf of TDG and by Paul J. Travers ("Travers") on behalf of Vuzix. That Agreement contains the following arbitration clause:

Section 10.06 Arbitration.

(a) General. All controversies and disputes between the Parties arising out of, relating to or in connection with the interpretation, performance or enforcement of this Agreement, any Transaction Document or the Transactions (each, a "Dispute") shall be finally resolved and decided as provided in this Section 10.06.

(b) Negotiated Resolution. Any Party that desires to raise a Dispute shall give written notice thereof to the other Party, which notice shall state with reasonable specificity the subject to the Dispute and the principal facts underling the Dispute. In the event that a Dispute arises between the Parties, the Parties shall promptly meet and negotiate in good faith to reach an amicable resolution of the Dispute.

(c) Arbitration. If the Parties are unable to resolve any Dispute through negotiation within thirty (30) days after the notice of Dispute, except as provided in Sections 10.05(d) and (e) below, the Dispute, whether it is based on federal, state or foreign Law and whether it is grounded in common law or statutory law, shall be settled exclusively by arbitration conducted as provided herein, and otherwise in accordance with the Commercial Arbitration Rules of the American Arbitration Association ("AAA")..

(e) Other Relief. The procedures specified in this Section 10.06 shall be the sole and exclusive procedures for the resolution of disputes between the Parties arising out of or relating to this Agreement, any other Transaction Document or the Transactions, and, without limiting the generality of the foregoing, a Party, without prejudice to the above procedures, may seek an injunction, specific performance or other legal or provisional equitable relief from the arbitrator(s) pursuant to the AAA Optional Rules for Emergency Measures of Protection (or any other AAA rules providing for equitable or other similar types of relief) or, in the event such relief is not available or inappropriate, judicial relief from a tribunal other than the AAA if in that Party's sole judgment such action is necessary to avoid irreparable damage or to preserve the status quo and that money damages will not provide an adequate remedy.

Asset Purchase Agreement Section 10.06, Feb. 8, 2013, ECF No. 14-1. Section 1.01 of the Agreement defines the following relevant terms:

"Shared Services Agreement" means the Shared Services Agreement that is attached as Exhibit F.. "Transaction Documents" means this Agreement and any other agreements, documents, certificates or instruments to be executed and/or delivered in connection with the Transactions and all Schedules including the Bill of Sale, the Assignment and Assumption Agreement, the Shared Services Agreement, the Authorized Reseller Agreement, and the License Agreement.

"Transactions" means the transactions contemplated by this Agreement and the other Transaction Documents.

Asset Purchase Agreement Section 1.01. The parties also executed a Shared Services Agreement, also dated June 15, 2012, and signed by Balet for TDG and Travers for Vuzix. In that document, the following section relates back to the Asset Purchase Agreement; "1.1 Definitions. Capitalized terms used herein (including the Appendix hereto) and not otherwise defined herein shall have the meanings assigned to such terms in the Purchase Agreement." Shared Services Agreement section 1.1. The Shared Services Agreement does not have an arbitration clause, but does contain two sections that are relevant to the Court's decision here:

4.3 Injunctive Relief. Seller, on the one hand, and Buyer, on the other, acknowledge and agree that the other party would be damaged irreparably if any provisions of ARTICLE IV are not performed in accordance with their specific terms or are otherwise breached, and that money damages alone would be an inadequate remedy to compensate the other party for any such breach. Accordingly, each party agrees that the other party will be entitled to an injunction or injunctions to prevent breaches of the provisions of ARTICLE IV and to enforce specifically ARTICLE IV in any action instituted in any court of the United States or any state thereof having jurisdiction over the parties and the matter, in addition to any other remedy to which a party may be entitled at law or in equity, which other remedies, including monetary damages, will in no way be limited by the foregoing..

6.13 Consent to Jurisdiction. Each of the parties irrevocably submits to the exclusive jurisdiction of (a) the courts of the State of Delaware, and (b) the United States District Court for the Western District of New York , for the purposes of any suit, action or other proceeding arising out of this Agreement or any transaction contemplated hereby. Each of the parties agrees to commence any action, suit or proceeding relating hereto either in the United States District Court for the Western District of New York or if such suit, action or other proceeding may not be brought in such court for jurisdictional reasons, in the applicable New York state court sitting in Monroe County, New York. Each of the parties further agrees that service of any process, summons, notice or document by U.S. registered mail to such party's respective address set forth above shall be effective service of process for any action, suit or proceeding in New York with respect to any matters to which it has submitted to jurisdiction in this Section 6.13. Each of the parties irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement or the transactions contemplated hereby in (i) the New York state court sitting in Monroe County, New York, or (ii) the United States District Court for the Western District of New York, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum.

Id. sections 4.3 & 6.13.

In its complaint, TDG details two incidents in support of its causes of action: (1) a Vuzix employee passed himself off as the vice president of TDG, used that vice president's email account to contact a prospective TDG customer, and falsely represented the nature, characteristics and qualities of TDG's services and commercial activities, all without authorization; and (2) Paul J. Travers made false and misleading statements to a representative of the United States Army Contracting Command that TDG, ...


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